Income Insurance: What it expects from fund managers on sustainability
Income Insurance expects the external managers it works with to be cognisant of sustainability considerations and has laid out guidance on what it wants to see in terms of investment processes, engagement and stewardship, a senior company executive said.
“Any new mandates that we consider, we apply a sustainability lens,” David Chua, chief investment officer at Singapore’s Income Insurance, told AsianInvestor.
“We want to ensure new mandates are aligned with us in terms of sustainability and, in turn, decarbonisation.”
The insurer has embedded in its guidelines for fund managers its expectations of integrating environment, social and governance (ESG) considerations in investment processes and exercising active engagement and sound stewardship practices, he said.
As a composite insurer, Income Insurance has been focusing strongly on sustainability in recent years, under Chua’s leadership.
He was recently named one of AsianInvestor’s Top 15 life insurance executives in Asia.
EMBARKING ON A JOURNEY
Established in 1970 to plug a social need for insurance, Income Insurance, formerly known as NTUC Income, went from being a cooperative to a corporation in September 2022.
When the Singaporean entity first embarked on its sustainability journey a few years ago, one early consideration was to ensure all the managers it worked with were United Nations Principles for Responsible Investment (UNPRI) signatories.
“Now we also have deeper engagements because every fund manager has a differentiated, nuanced way of how they integrate sustainability into their investment process,” said Chua.
“We want to better understand their approach so that we are able to influence them to get the outcome we all desire.”
Income Insurance also set up a standalone sustainable investment in 2023 to further along its journey in this space.
“Still, we have to ensure that the thinking and commitment to sustainability is widely spread across the investment team,” added Chua.
“It is important to look at this from a total portfolio perspective.”
The insurer also made a recent commitment to invest up to $760 million (S$1 billion) in climate transition financing, among other initiatives.
It became an anchor investor in the Fullerton Carbon Action Fund in June as part of that commitment.
“We want to be more deliberate in how we deploy the S$1 billion so we have prudently not set a timeline on these investments,” Chua said.
He said the aim is to invest where it believes it can influence meaningful outcomes and drive real world changes.
Income has also been actively investing in green bonds that will be used to develop green infrastructure within Singapore.
It has also started to identify a few strategic partners with technical domain expertise (on topics such as decarbonisation solutions, data for physical climate impact) and commitment to similar sustainability values, said Chua.
CARBON METRICS
Income Insurance is also working with external fund managers to reduce greenhouse gas emissions of its public assets portfolio.
“The metrics we have adopted considers not just the individual companies’ absolute emissions and carbon intensity; it is also a function of the holdings mix of the investment portfolio,” said Chua.
The insurer measures emissions in two ways: “We look at the absolute carbon emissions coming from our portfolio,” he said.
“At the same time, we also monitor and track the carbon intensity [a measure of carbon dioxide and other greenhouse gases (CO2) per unit of activity] of our portfolio.”
Another important effort is engaging companies and taking targeted efforts via fund mandates to bring about change.
“We are also very mindful this is a multi-year, even a multi-decade effort,” added Chua.
Still, one of the big hurdles for asset owners in taking actionable sustainability measures is the lack of relevant data.
Chua, however, noted that there have been significant improvements in the availability of sustainable investing data in the past few years.
“We still don’t have 100% of the emissions data, yet [recent developments] are encouraging because there are companies that are still developing in terms of the reporting capabilities and availability of data.”
DEPTH OF DATA
There are also differences in the amount and depth of data available from private and public markets.
“With public markets, data is more freely available while with private market investee companies, the companies may not be required by regulation to provide information.
“However, we actively seek information around it to ensure we are able to carry out the sustainability journey through private investments,” added Chua.
He believes the data reporting requirements and standards in public markets will eventually transfer over to private markets, as regulators and asset owners ask for more information.
“With the private markets managers we work with, they are also getting more involved in asking investee companies about their decarbonisation plans,” he added.
In addition, private markets will be critical when it comes to effecting some of the big decarbonisation changes and in helping accelerate the closing of funding gap, he said.
All said and done, the insurance CIO is a firm believer in the sustainability cause. After all, “not doing anything is a form of risk in itself,” he said.