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January 25, 2002
Swiss Insurance Company Invests in Sustainability
by William Baue
The reinsurance giant Swiss Re supports sustainability not only in its business practices but also
in its investments, and has one portfolio committed exclusively to sustainability.
Swiss Re (SWRE), one of the world's largest
reinsurance companies, has established a reputation for advancing the cause of sustainability
around the globe. The Zurich-based firm recognizes the negative effects environmental degradation
can have on business, and understands that sustainable business practices help counteract these
effects. Swiss Re bases its insurance rates in part on their clients' environmental impact.
Because sustainable companies have less risk in terms of potential losses due to environmental
mismanagement, all other things being equal, those companies would pay lower premiums.
Swiss Re's commitment to sustainability has carried through to its internal investments
as well. In 1996, the Swiss Re Investors division established a sustainability portfolio through
its Group Sustainability Management Unit. Swiss Re's definition of sustainability investing
implies a best-of-class method where fund managers consider all sectors for investments,
identifying those companies within a sector that implement the most progressive environmental
"Ecological criteria are given equal weight to economic criteria in evaluating
prospective investments," reads an explanation of the sustainability portfolio's investment
strategy in Swiss Re's 2000 Environmental Report. The Group Sustainability Management Unit first
assesses the ecological innovation potential of a prospective investment before assessing its
investment return potential; only if it passes muster on both counts does the team perform due
diligence to ascertain the viability of the investment.
In 2000, for example, the unit
considered 20 new companies, only a third of which warranted detailed analysis. In the end, the
portfolio managers decided to invest in only one company: AgraQuest, a California-based developer
and producer of natural microbial (as opposed to chemical) pest controls.
invested directly in AgraQuest, which had yet to list on a stock market. Swiss Re invests directly
in ten other companies, such as Precious Woods, which practices sustainable forestry in South and
Central America, and Evergreen Solar, a photovoltaic cell producer that subsequently made an
initial public offering (IPO) on the NASDAQ. Swiss Re invests directly to support the expansion of
sustainable business practices that might not flourish without the necessary infusion of venture
The Group Sustainability Management Unit diversifies the portfolio by investing
in funds as well. For example, the portfolio's holdings include the Storebrand Principle Global
Fund, which implements a sequential analysis and selection process. Storebrand starts
traditionally by assessing an investment's financial viability, and then uses sustainability
criteria to select the top performers across industry sectors. The portfolio also invests in three
Swiss Re splits its sustainability portfolio, a total outlay of 86.4 million
Swiss francs ($49.43 million in U.S. dollars), evenly between private equity investments and
investment funds. By the end of this year, the unit plans to increase private equity holdings
based on sustainability criteria to between 12 and 14 companies. It also plans to increase overall
investment to 100 million Swiss francs, the original target value of the portfolio.
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