Green Light for LF’s Unit-Linked Platform

    Stockholm (NordSIP) – Söderberg & Partners annual report Sustainable Unit-Linked Insurance has become a regular feature. The rating included in the paper constitutes a useful benchmark for the insurance industry in Sweden. The wait is now over for all insurers anxiously awaiting the 2021 results. The eighth edition of the report was officially released on 2 February. It is an interesting read, focusing on the differences in the ways Swedish unit-linked insurance companies work with sustainability. The authors also take a closer look at how insurers select funds based on ESG criteria, how they engage with asset managers, and to what extent they make it easier for savers to choose funds responsibly.

    This year’s analysis highlights three changes in the overall rating of insurance companies. Länsförsäkringar’s rating has been raised from yellow to green, whereas Handelsbanken’s rating has been lowered from green to yellow, and Nordea’s rating has dropped from yellow to red.

    “Länsförsäkringar received a higher rating because the level of sustainability in their fund offering has increased since last year’s analysis,” comments Lingyi Lu, Head of Sustainability at Söderberg & Partners (in Swedish). “The fall in Handelsbanken’s rating is largely due to the fact that in this year’s analysis, we have placed greater emphasis on the number of green and sustainability-oriented funds in the range than in previous years. Handelsbanken has, relatively speaking, fewer such funds in its offering compared with several other companies in the analysis. Nordea’s lower rating is mainly due to the fact that they do not follow up and engage with all the funds in their offering and do not report any proactive dialogues with external managers,” she adds.

    The easy-to-grasp traffic-light system applied by Söderberg & Partners consists of three categories, with clearly defined criteria each. To achieve a ‘green’ rating, a unit-linked insurance company should collect comprehensive information about the sustainability work done by the funds on its platform and needs to have a clear evaluation model where sustainability plays a decisive role in fund selection. This should, naturally, be reflected in the fund offering, which is supposed to include a large proportion of sustainable products. The insurance company also needs to demonstrate a regular engagement with fund managers or fund companies to discuss sustainability issues and areas for improvement and commit to collaborative efforts to drive change. A ‘green’-light insurer also needs to actively help savers take sustainability into account in their investment decisions, transparently communicating sustainability efforts.

    A ‘yellow’ rating indicates that the insurer collects comprehensive sustainability information about the funds and has defined minimum requirements for the funds to be admitted to the platform. Although the company is expected to monitor the funds’ sustainability level on a regular basis, a ‘yellow’ light implies that it does not do it as systematically or frequently as a company with a ‘green’ rating. The level of engagement and collaboration on sustainability issues is not as ambitious as for ‘green’ insurers either.

    Finally, a ‘red’ rating signifies that the unit-linked company applies lower sustainability requirements for bringing in funds on their platform. It also implies a lack of structured process for following up the funds’ sustainability level and no significant proactive engagement. ‘Red’-rated companies are generally not so transparent when communicating about their own sustainability work. Compared with other unit-linked insurance companies, they offer less sustainable products as a percentage of their total offering.

    Image by WikimediaImages from Pixabay

    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

    Latest Posts

    Partner content


    NordSIP Insights Handbook

    What else is new?