Stockholm (NordSIP) – On 24 January, Söderberg & Partners published their eagerly awaited annual report, Sustainable Unit-Linked Insurance 2023 (in Swedish). The analysis has become a regular feature and a valuable benchmark for the Swedish insurance industry. The report endeavours to answer several important questions, such as to what extent insurers select funds based on their sustainability, how they engage with fund managers to push for more responsible investments, and whether they are successful in making it easier for savers to choose sustainable funds.
High- (and low-) lights
Among the thirteen Swedish unit-linked insurance companies covered by the analysis, four have been given the green light in this year’s review; another four get a yellow light and three – a red light.
Notable changes since last year are that both Folksam and Futur Pension have been upgraded from yellow to green. According to Söderberg & Partners, the two insurers have earned higher ratings by improving the selection of funds on their platforms and making it easier for pension savers to find sustainable options. The new sustainable leaders are joining Skandia and SPP at the top of the ranking.
Two fund insurers, meanwhile, have been downgraded in this year’s review. Länsförsäkringar loses its green status to yellow, mainly because its minimum requirements for fund selection have failed to keep up with competitors’ requirements. SEB has been demoted from yellow to red. According to Söderberg & Partners, the downgrade is mainly because the insurer does not make it easy for pension savers to find sustainable options among its available funds.
“We note that the majority of unit-linked insurers persist in applying the new classification system provided by the Sustainable Finance Disclosure Regulation (SFDR), disclosing under which article the funds on their platforms are incorporated and using the classification in their selection process,” comments Lingyi Lu, Sustainability Manager at Söderberg & Partners (in Swedish). “Most companies state as an objective that any new funds admitted to their range should be Article 8 or 9 funds. For some insurers, it has even become a requirement. Engagement with fund managers has become clearer, and several companies have identified specific themes to focus on during the year,” she adds.
The criteria (a reminder)
The easy-to-grasp traffic-light system applied by Söderberg & Partners consists of three categories, with clearly defined criteria for 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. It needs a transparent 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 its platform. It also implies a lack of a structured process for following up on 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.