Switzerland’s biggest insurance company Zurich Insurance Group (Zurich) announced today its intention to invest up to US $1 billion into green bonds issued by the World Bank, International Finance Corporation, and other development institutions.
These green bonds, which they call impact investments, fund projects from around the world that reduce the effects of climate change and assist communities to adapt to its consequences.
“Responsible investment at Zurich is about ‘doing well and doing good’,” said Cecilia Reyes, Chief Investment Officer. “Zurich recognizes that creating value for all its key stakeholders is crucial to long-term success. Green bonds are a good fit with Zurich’s overall investment strategy as well as its impact investing aspirations, targeted to support sustainable development and resilient communities. It is an opportunity to invest both with impact and at a return fully compensating for the risk.”
Bloomberg reported in August that sales of green bonds are heading towards a record year as governments from the US to China promote the global expansion of clean energy to tackle climate change, and as the bonds offer investors an alternative to volatile equities.
Investment into green bonds, according to Zurich, makes good business sense because the global insurer has a rapidly growing footprint in many emerging markets and is thus directly exposed to the challenges related to potential effects of climate change and the intensive use of scarce natural resources. Zurich says it is building a “portfolio of impact investments” to address these issues.
BlackRock, a US investment management giant, has been chosen to select, buy, and sell green bonds for the portfolio, in accordance with guidelines, clearly defined by Zurich.
Their involvement may come as no surprise. Before this announcement, BlackRock had already acquired the domain ImpactInvesting.com which is being mysteriously redirected to their homepage.
Responding to this initiative, vice chairman of BlackRock Ken Wilson said, “We are proud to team up with Zurich as the company commits to the green bond market segment at this important stage of the market’s development.”
“By encouraging transparency, liquidity, rigorous inclusion credentials, and impact reporting, we can together contribute to the creation of a robust and credible market, which will have a greater impact than any singular investment in green bonds. BlackRock’s commitment to impact investing spans asset classes and enables our clients to access investment strategies that target a reasonable risk-adjusted rate of return in addition to positive and measureable social or environmental outcomes.”
Photo from Zurich.