LCP’s latest Responsible Investment review shows bulk annuity insurers’ proactive steps in responsible investment and climate risk management, aiding sponsors and trustees in informed decisions.
The nine insurers that were evaluated have all established official net-zero investment targets; the average target year is 2050, according to the main findings. Insurers are also interacting with high emitters and implementing interim targets in addition to investing in climate solutions such as renewable energy.
The UK Stewardship Code now has seven of the nine insurers as signatories as asset owners. LCP highlights that to address systemic risks like climate change, insurers must improve systemic stewardship efforts and define clear goals for forward-looking metrics.
LCP partner Tom Farrell says: “I am encouraged by the progress made by insurers when it comes to responsible investment practices within their bulk annuity arms. There have been tangible improvements in areas where we engaged directly with insurers in our previous reviews, such as establishing robust net zero targets and signing up for the UK Stewardship Code.
“However, it is important to recognise that there is still a long journey ahead to effectively manage systemic ESG risks such as climate change. The insurers (and other investors) need to collaborate and continue to evolve and expand their efforts to stay ahead of these challenges to ensure effective management of these risks and the long-term security of members’ benefits.
“As a firm, we are committed to expanding our own systemic stewardship efforts. Throughout 2024, we will be increasing our engagements with policy makers and regulators with the aim of improving the security of member benefits in the long term whether they are provided by pension schemes, insurers or other alternative routes.”