Zurich UK transfers $ 1 billion investment portfolio to new ESG benchmark

A statement said that Zurich had created the new index in collaboration with investment manager DWS and MSCI. Zurich has transferred nearly $ 1 billion of its passive US equity mandates to a fund managed by DWS that tracks the new index and applies an additional filter that excludes companies that do not follow Zurich’s ESG policy.

The new index assigns 629 companies an ESG score based on MSCI’s ESG rating methodology. It will be managed, calculated and distributed by MSCI. It will include companies based on previous MCSI ESG assessments. Each company’s score is combined with its market capitalization, assigning a higher weight to the index of companies with a “good and improving” ESG profile, according to a statement.

In particular, the new index is “sector neutral”; this means that the high carbon emitting industries will have the same overall weighting in the index, but different allocations are made at the level of each company.

According to a Zurich analysis, for every million dollars invested in the fund managed by DWS, exposure to financed carbon emissions increases from 58 tonnes to 41 tonnes, all without hurting expected returns or increasing risk.

“Climate change is one of the most pressing issues of our time. By reducing the financed carbon emissions from our portfolio and continuing to engage with businesses, we aim to play our part in financing a more sustainable future, ”said David Thompson, investment director of Zurich UK. “Weighting our investments in companies that perform well on ESG principles can deliver both superior risk-adjusted returns for clients and more sustainable results. “

“2021 will be a critical year for climate action as we head towards the UN conference (COP26) in November. With a growing interest and need for solutions in this space, we have had the pleasure of developing this index. The MSCI ESG indices are designed to provide institutional investors with efficient and transparent tools to integrate ESG and climate considerations into their investment portfolios and align their benchmarks with their objectives, ”added Mark Guirey, MSCI Head of Clients of EMEA insurance.

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