Sustainable investments framework
The inclusion of sustainability within the investment process is a key instrument to allow an insurance group to create long-term sustainable value for its stakeholders. As an institutional investor Generali plays a fundamental role in contributing to achieve sustainable development goals while avoiding financing economic activities that have a negative impact on the environment and society.
In this context, the integration of sustainability factors in the investment process has a dual role: on the one hand, it allows to positively contribute to the development of a more sustainable economy, with a positive impact on the environment and society; on the other, it allows a better management of sustainability risk to which its investments are exposed.
The Group defined a framework for the integration of environmental, social and good governance factors in insurance proprietary investments.
Negative screening
The negative screening approach aims at excluding from the Group’s investable universe those issuers, sectors or activities with poor ESG practices or not aligned with the Group climate strategy that could potentially impact on their long-term financial performance and/or expose the Group to higher sustainability and reputational risks.
The methodology adopted by the Group is based on three typologies of negative screening:
- Screening at activity level: the screening aims at excluding companies involved in economic activities with a negative impact for the environment and society and, indirectly, also a financial risk:
- companies operating in the unconventional weapons sector;
- companies operating in the thermal coal sector;
- companies operating in the unconventional oil and gas sector.
- Screening of controversies: the screening aims at excluding those issuers (both corporate and sovereign) involved in severe controversies linked, among the others:
- for the corporate issuers, to violations of the UN Global Compact and of the OECD Guidelines for Multinational Enterprises;
- for the sovereign issuers, to the criteria that include i) the respect of political rights and civil liberties, ii) the level of corruption in the country, iii) the level of cooperation in the global fight against money laundering and terrorism financing, iv) Tax haven countries, v) the level of contribution to deforestation.
- ESG Laggard: This screening aims at excluding from the investable universe those corporate and sovereign issuers which, based on the result of an ESG analysis have been identified as having a particularly low ESG profile (ESG Laggards) compared to the sector to which they belong (corporate) or to the global universe of the asset class (sovereign).
According to their level of involvement and responsibilities in the abovementioned controversies, and based on an internal assessment, the companies are either engaged or Restricted. In the last case, specific actions are taken, including a ban on new investments in the company, the divestment of any equity exposure and the run-off of fixed income exposure.
Positive screening
The positive screening is an additional approach to negative screening and provides a further mean of influencing investment choices also on the basis of ESG factors.
The approach aims at considering the ESG performance of issuers during the investment selection with the goal of identifying and overweighting in the portfolio those companies that are better placed to seize the opportunities of a growing ESG market while mitigating sustainability risk. This approach allows to integrate elements that may not be considered in the traditional financial analysis.
The Group's insurance companies that use this screening invest in issuers or projects selected also for their positive ESG performance compared to their peers (sector, geographical area, etc.) with a best-in-class, best-in-universe and/or best-effort approach deriving from the ESG analysis.
Investment with sustainable characteristics
The Group promotes, for the various asset classes, specific investment strategies aimed at supporting economic activities with sustainability characteristics capable of creating long-term value not only for investors but also for society as a whole.
Green and sustainable investments
Investments in green, social sustainable and sustainability linked bonds aims at financing projects and activities having a positive impact on the environment or on society.
These investments contribute to mainly financing projects and initiatives for the development of renewable energies and energy efficiency, but also projects linked to transport solutions with low environmental impact and green buildings.
Real estate investments with high-level sustainability certifications
The Group – through its asset manager Generali Real Estate - integrates ESG factors both into investment choices, through dedicated ESG assessments for portfolio assets and a proprietary methodology for the due diligence during the purchase phase, and into the maintenance and management of portfolio assets and activities.
At the end of 2022, real estate assets with high-level external certifications (BREEAM Very Good or higher; LEED Gold or higher; the respective levels of other local certifications like HQE, DGNB) amounted at € 10.7 billion.
Sustainable infrastructure-debt investments
The infrastructure projects in which the Group invests into belong to sectors with the potential to contribute to clear social and environmental objectives, such as the development of renewable energies, rail transport, digitalization and environmental services. A particular focus is given to the Sustainable Development Goals (SDGs) of the United Nations that can be effectively addressed through the infrastructural asset class.
La Fenice 190
La Fenice 190 is a € 3.5 billion investment plan to support the recovery of the European economies impacted by Covid-19, starting from Italy, France and Germany and then to target all the European countries in which the Group operates.
The plan aims to finance, through debt and equity instruments, infrastructure, innovation and digitalization projects, support for SMEs, green housing, health facilities and education.
The investment program therefore pursues both environmental (e.g. energy requalification of existing spaces and infrastructures, reduction of polluting emissions, development of renewable energies) and social (e.g. improvement of people's quality of life, through the support of companies that promote socially responsible labour policies and fairer employment contracts as well as urban redevelopment initiatives for living spaces) objectives.
Active ownership (engagement and voting)
As a responsible investor, we commit to promoting sustainability, corporate social responsibility and good governance in our investee companies through voting at shareholders’ meetings and dialogue. Both activities are used as an effective leverage to influence corporate practices on ESG issues, to encourage greater transparency on these issues or to gain a greater understanding of the investees’ ESG risk management, and to manage the main negative impacts on sustainability factors deriving from our investment strategy.
- Voting is the formal expression of approval or disapproval on various matters, including ESG issues. Our voting principles cover topics such as shareholder rights, remuneration, financial disclosures, and environmental and social aspects. We exercise our voting rights whenever possible and base our decisions on internal analysis and research.
- Dialogue improves our investment decisions and influence investee companies to improve their practices. Generali Group engages individually or in joint efforts with other institutional investors and monitors companies’ progress on topics such as decarbonization, gender equality and biodiversity. Through its asset managers, the Group engages specific companies with poor sustainability performance that nevertheless show potential for a drift towards a more sustainable business conduct.
For more details please refer to the Group Active Ownership Report 2022.
Selection and monitoring of Asset Managers/Funds
We invest not only through dedicated mandates but also through investment funds managed by Asset Managers that are either internal or external to the Group.
The Group defined a set of screening criteria in order to evaluate the Asset Manager’s ESG strategy and the alignment with some of the commitments made by the Group, such as restrictions on thermal coal, significant controversies and unconventional weapons, transparency and commitment to fighting climate change.
Constant dialogue with the Asset Managers of the funds in which we invest is a key element that allows us to illustrate and promote the Group’s needs on sustainability integration towards them, especially when the assessment of the asset managers’ policies identifies some issues which, while not constituting an element of divestment, may represent areas for improvement.