Marie Niemczyk, Head of Insurance Relations at Candriam, explains why ESG is increasingly becoming a key topic for institutional investors, notably insurers.
Why is ESG becoming increasingly important for institutional investors?
Marie Niemczyk: Anyone who ignores sustainability issues and ESG factors runs the risk of exposing their investments to unwanted risks. For example, sustainability risks such as climate change can negatively impact the value of assets held in an investment portfolio. This can occur directly, through the physical impacts of climate change, or as a result of the energy transition. Thus, climate change can cause supply chain disruptions, which trigger financial losses. Companies that fail to adapt to the transition to a low-carbon economy can become what are known as ‘stranded assets’.
There are reputational risks, too. Companies with issues in environmental, social and governance matters can inadvertently end up making headlines. There has been an ever more striking trend in this respect over the last few years, with even investors in discredited companies attracting bad press.
But besides these risks and the desire to avoid them, investors are also increasingly recognizing that ESG can offer a number of opportunities.
