Investment Horizon:
Life insurers have investment horizons that can span decades, aligning with the long-term nature of their liabilities. This long-term perspective is crucial in managing and matching assets to future liabilities.
According to the CFA Institute, life insurers are particularly focused on long-term sustainability and stability, making ESG factors relevant as they can significantly impact long-term investment performance.
ESG Integration:
ESG integration helps life insurers manage risks and seize opportunities that are pertinent over long investment periods. This includes climate change risks, social trends, and governance issues that can affect the performance of investments over time.
The MSCI ESG Ratings Methodology highlights that incorporating ESG factors can improve the resilience of investment portfolios to long-term risks, aligning well with the objectives of life insurers.
Financial Impacts:
Recognizing the financial impacts of climate change and other ESG factors, life insurers aim to mitigate risks associated with environmental, social, and governance issues. This proactive approach helps in maintaining the solvency and profitability of the insurance business over the long term.
Studies show that ESG factors can influence credit ratings, investment returns, and overall financial stability, which are critical considerations for life insurers with long-term obligations.
Regulatory and Stakeholder Pressure:
Increasing regulatory requirements and stakeholder expectations for sustainable and responsible investment practices also drive life insurers to integrate ESG factors into their investment strategies.
The CFA Institute notes that regulatory frameworks and stakeholder demands are increasingly aligning towards greater ESG integration, influencing life insurers to adopt these practices.
[References:, CFA Institute, "Environmental, Social, and Governance Issues in Investing: A Guide for Investment Professionals.", MSCI ESG Ratings Methodology documents, which discuss the relevance of ESG factors in long-term investment strategies for insurers., , , , , ]
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