Life insurance and socially responsible inversting (SRI): over 50 percent of clients ready to invest a portion of assets in SRI funds
- 17/04/2008
- 58 percent believe that life insurance vehicles are aligned with SRI1 concept
- 37 percent would invest over 20 percent of their life insurance contract in SRI funds
- Primary motivation: reconcile ethics and sound investments
- Asset Management: BNP Paribas Assurance takes client expectations into account
Within the framework of its Corporate Social Responsibility strategy, in September 2007 BNP Paribas had its euro (non-unitlinked) fund (totaling 49 billion euro2) analyzed against the six SRI domains and made a formal commitment to apply Environment, Social and Governance (ESG) criteria to its investment decisions.
Through these proactive initiatives, BNP Paribas Assurance has made Socially Responsible Investment practices available to 1.3 million clients through the non-unit-linked components of their life insurance contacts.
BNP Paribas Assurance pursued this progress-driven process by asking TNS Sofres to conduct a survey of 850 clients3 of BNP Paribas or Cardif with life insurance contracts to measure their attitudes and expectations towards socially responsible investing.
Completed in December 2007, the survey revealed several instructive results.
SRI is not widely recognized but is nevertheless promising
While 84 percent of the respondents recognized the concept of “sustainable development”, only 27 percent had heard of socially responsible investing and just 5 percent said they held socially responsible investments. This result corroborated the general profile of the French market, where out of 16.6 billion euros invested in SRI vehicles at December 31, 2006, 63 percent was held by institutionals and 37 percent by individuals (source: Novethic).
At the same time, 34 percent of BNP Paribas or Cardif clients said that ethical considerations ranked high in their investment decisions and 41 percent think these criteria will become even more important in the future (49 percent for upper middle class segments and 52 percent for high net worth individuals). 58 percent of the respondents believe that life insurance investments are adapted to an SRI approach.
From intentions to actions: blocking points and motivations to act
Investment performance is not a blocking point. Performance is ranked just third among the criteria that dissuade people from selecting SRI vehicles, behind the lack of transparency (70 percent of answers) and a lack of information (68 percent). Furthermore, clients have mixed or uncertain feelings concerning their performance expectations for SRI funds, since 35 percent have no opinion while 34 believe these vehicles perform as well as other investments.
The main motivation is a desire to weigh on the behavior of companies and thus strike a balance between ethics and profit objectives.
One of the main blocking points is the lack of information. Two-thirds of the clients interested in investing part of their life insurance contract in SRI vehicles seek the advice of their financial advisor to help them choose an investment (39 percent want to be actively involved in the investment decision).
Over 50 percent of clients are ready to invest part of their life insurance contract in SRI vehicles
56 percent of the clients in the survey said they were ready to act by investing part of their life insurance contract in an SRI vehicle. Among them, 37 percent would invest over 20 percent in SRI and 8 percent said they would invest over 50 percent. Among the most attractive funds were those with specific themes, enabling them to link their investment to a cause they want to support. This “themed” investment concept was considered more important than “best in class”, a notion that is not as readily understood by the general public.
Social issues were considered as important as environmental issues in the ranking of themed approaches to socially responsible investing.
86 percent of the respondents approve of BNP Paribas Assurance’s SRI approach, impacting directly on the company’s strategy.
86 percent of the clients in the survey approve of BNP Paribas Assurance’s approach, which consists in increasing the SRI share of its non-unit-linked fund while maintaining the financial performance of the contracts invested in the fund.
To address the expectations of the majority of the clients who rely on their financial establishment to make SRI part of their life insurance contracts, BNP Paribas Assurance will continue to apply ESG criteria for the management of its non-unit-linked fund, applying three approaches:
- Equities: BNP Paribas Assurance will continue to pursue its “best in class” strategy. At equivalent performance and outlook, it will accord priority to shares in companies that receive the best ratings from extra-financial ratings agencies.
- For government bonds (44 percent of the non-unit-linked fund): BNP Paribas Assurance will work to make SRI criteria more transparent, translating its investment choices into concrete terms. It has committed to accord priority to states that have ratified the main international treaties that guarantee respect for human rights and labor practices.
- 2 SRI funds: BNP Paribas has created the BNP Paribas Asset Management SRI fund, with 300 million euros in assets, and invests in a selection of multi-management SRI funds, with outstandings already totaling 55 million euros.
For clients interested in taking their socially responsible investing approach to another level, BNP Paribas Assurance has created three unit-linked funds invested in specific areas: water, alternative energies and social initiatives (job creation, gender equality, etc.). These funds will be available within contracts with multiple underlying assets marketed via the BNP Paribas network, as well as part of Cardif life insurance contracts sold via independent financial advisors.
For clients interested in taking their socially responsible investing approach to another level, BNP Paribas Assurance has created three unit-linked funds invested in specific areas: water, alternative energies and social initiatives (job creation, gender equality, etc.). These funds will be available within contracts with multiple underlying assets marketed via the BNP Paribas network, as well as part of Cardif life insurance contracts sold via independent financial advisors.
Speaking at a press conference presenting this survey, Laurence Pessez, BNP Paribas Assurance Director of Corporate Social Responsibility, said: “We are firmly convinced that SRI is a segment that interests retail investors, so long as they have a choice of clear investment products aligned with the priorities they have expressed. These products need to be offered by financial advisors who are ready to promote investment products that balance ethics and investment objectives.”
1 SRI: The six SRI domains are: Human Resources, Business Behavior, Human Rights, Environment, Corporate Governance and Community Involvement.
2 At end February 2008
3 Exclusive BNP Paribas Assurance –TNS Sofres survey. Telephone survey carried out between November 30 and December 8, 2007 covering a representative sample of 850 clients of BNP Paribas/Cardif across France selected using the quota method (gender, age, region, asset value).
