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Responsible investment strategy

As an integral part of our Group strategy, corporate responsibility is also reflected in our sustainable approach to investment. The Principles for Responsible Investment (PRI) serve as the framework in this context.

Insurance companies are subject to strict security and return requirements. They have to ensure that their clients’ money is invested safely and profitably. Munich Re’s investments are largely bundled under the umbrella of MEAG, our internal asset management arm. This simplifies the process of investing Group assets in accordance with uniform rules and principles and also helps us keep track of and monitor investments at all times.

MEAG currently manages a global portfolio worth more than €260bn. Over and beyond the financial aspects, we also take ecological, social and governance (ESG) criteria into consideration when making investment decisions. The bulk of our capital investment meets sustainable investment criteria. Our asset management follows the Principles for Responsible Investment (PRI). We played a prominent role in drafting these principles and were the first German company to sign them in 2006.

Below, we describe how we put into practice our approach to sustainable investment, the processes we have established, and the product solutions we can offer:

Our approach: Responsible Investment Guideline

At Group level, a team consisting of representatives of Munich Re, ERGO and MEAG strategically develops socially responsible investment in line with PRI requirements. Some 100 experienced MEAG portfolio managers are responsible for implementing investment decisions and selecting attractive securities. 

As early as 2002, we decided that our equity and bond investments had to meet specific sustainability criteria. In 2005, this requirement was incorporated in our Group-wide Investment Guideline. The Responsible Investment Guideline (RIG) was extensively revised in 2016 and now summarises all guidelines and requirements related to PRI and ESG concerning asset management at Munich Re (Group). For the asset classes of infrastructure, renewable energies and forestry, we have established an investment process that takes into account both financial and ESG criteria. We regularly review our sustainability criteria for these asset classes using the ESG criteria of external rating agencies. Sustainability investment criteria have not yet been defined for all asset classes. The small number of blank spots on our sustainability map are gradually being filled in on the basis of criteria developed in-house and criteria available externally.

Our sustainable investment criteria in the different asset classes:

  • Equities and corporate bonds: We base our investments on the analyses and classifications of external research providers in the field of sustainability. Munich Re invests in equities and corporate bonds featured in sustainability indices, such as the Dow Jones Sustainability World Group Index, the FTSE4Good Index Series and the Ethibel Sustainability Index (ESI).

  • Government bonds: We also assess government bonds in terms of sustainability. As the starting point for this process, we take the internal Munich Re (Group) sustainability country rating, which is based on the Country Risk Monitor of the Sustainalytics rating agency. In cases where countries fail to satisfy our criteria, MEAG refrains from investing in their government bonds or the bonds of quasi-governmental organisations.

  • All other bodies issuing interest-bearing securities, such as state-owned companies, public and private financial institutions, or issuers of covered bonds, are assessed as well. We use the ratings of independent providers of ESG analyses, for example oekom research, for this purpose.

  • Real estate: Sustainability is also important for us when it comes to real estate. We have defined sustainability criteria (for example, for energy efficiency and construction materials) which we apply on the purchase, construction or renovation of properties.

  • Infrastructure/renewable energies: As investments in renewable energies or infrastructure may extend over very long periods, we carefully examine all risks associated with these investments. For this investment class, we have also defined specific ecological, social and governance aspects (ESG criteria) which form part of the due diligence. In addition to these aspects, we examine meteorological and climate-related factors (such as solar irradiation in the case of solar installations or wind force in the case of onshore wind farms), as well as political parameters such as the relevant national energy policy.

  • Forestry: In the asset class of forestry, we have also established an investment process which, as well as financial criteria, follows additional important objectives relating to investment (including ESG criteria). We regularly review our sustainability criteria for these asset classes using the ESG criteria of external rating agencies.

Our investments: Priority on investment in infrastructure with a focus on renewable energies

Our investment in infrastructure with a focus on renewable energies has a double leverage effect: we contribute to the advancement of social developments by using our risk knowledge to promote new technologies through investment and innovative coverage concepts. 

On behalf of Munich Re, MEAG, the Group’s internal asset management arm, invests in infrastructure projects around the world. These include direct equity and outside capital investment in solar parks and wind farms, as well as participations in a power grid and a natural gas grid. By the end of the 2016 financial year, the volume of investment was around €2.8bn. 

As things stand at present, we plan to increase our investment in infrastructure to a cumulative total of €8.0bn, provided general conditions remain solid and a reasonable yield can be achieved. We aim to achieve this by continuing to strongly diversify our infrastructure investments, both regionally and by segment. This will enable us to obtain a spread of the technological and political risks, and thus of this portfolio’s main risk drivers.

Our products: Investment funds with sustainable success

Meeting economic, ecological and social requirements need not be a contradiction in terms. MEAG offers its institutional and private clients the international equity fund MEAG Nachhaltigkeit, and also the defensive mixed fund MEAG FairReturn, both of which are geared towards sustainable issues:

  • MEAG Nachhaltigkeit: The equity fund MEAG Nachhaltigkeit, which was set up on 1 October 2003, primarily invests worldwide in companies that conduct business in a responsible manner. Companies are selected on the basis of their environmentally friendly and socially responsible track record as well as their financial success. This involves supplementing holdings in standard stocks with forward-looking niche providers. Producers of tobacco, alcoholic beverages, and arms manufacturers are excluded, as are companies in the gambling industry.

  • MEAG FairReturn: The MEAG FairReturn fund, set up in June 2009, invests predominantly in Europe in accordance with strict social, ecological and financial criteria recommended by the oekom research rating agency. At the same time, there is a requirement for positive growth in value. The fund grew so successfully that MEAG opened it up to private clients at the beginning of 2010 with a separate shareholding class. 2017 saw MEAG FairReturn named foundation fund of the year for the fifth time in a row.

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