Climate risk is now embedded across AG's investment process

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How big is the insurance sector as a share of institutional investment market in Belgium?

Belgium's insurance sector holds assets worth around €300 billion. For scale, that's more or less the same amount held in Belgian savings accounts, or 8-9 times the value of assets held by Belgian pension funds. With assets in the region of €75 billion, AG accounts for a quarter of the insurance-sector investment portfolio.

Insurers tend to invest in long-term assets to match their liabilities from pension plans and other long-term insurance products. With the financial markets offering minimal, and in some cases zero, returns, insurers are now investing more in the real economy – in sectors like real estate, infrastructure, and direct loans to businesses and governments.​

What are Belgium's investment priorities and have these changed in light of the pandemic?

In September 2018, the federal government led by Charles Michel unveiled a National Pact for Strategic Investments, with five priorities: health care, digital transition, energy, mobility and education. The pandemic has underscored the importance of these priorities and made them all the more urgent.

So Europe is absolutely right to focus on the green and digital transition. But as we come to terms with shifts in the way we work and live our lives, we must not overlook the need to invest more in health care, education and sustainable cities.​

Climate change poses a clear and present long-term risk to businesses and the wider economy. How does a long-term investor like AG respond to this risk?

AG's greatest exposure to climate change risk comes from our real-estate portfolio, which is worth €6 billion. Preserving the long-term integrity of these investments means making sure that our buildings meet the strictest environmental and energy-efficiency standards. The same goes for the €4 billion we've invested in financing low-income housing projects, where we're seeing a strong focus on environmental performance with every new development. Likewise, green loans make up growing share of our €5 billion mortgage-loan portfolio.

And you can see this trend playing out in our €2.5 billion infrastructure portfolio as well. For instance, we've invested €500 million in renewables to support the green transition and, more recently, we've turned our attention to the digital transition by investing in fibre infrastructure.

At AG, we apply a sustainable and responsible investing framework to our entire portfolio, including bonds and equities (French​​ or Dutch​). Our approach is based on three principles:

• ​Exclusion: we do not invest in projects involving coal, for instance.
• Integration: for every investment decision we make, we look not just at financial metrics, but also environmental, social and governance (ESG) criteria.
• Engagement: under our active ownership policy, we seek to nurture sustainable practices from within.

To summarise, we've embedded climate risk, and ESG risk in general, across our investment process.​