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Original Risk: A Society for Change Agents

Plenum CAT Bond Fund gets higher sustainable investment grading


The Plenum CAT Bond Fund, the flagship offering from Zurich based specialist insurance-linked securities (ILS) and catastrophe bond investment manager Plenum Investments, has received a higher grading as a sustainable investment opportunity in its second assessment.

sustainable-investment-cat-bonds-ils-esgLast year, Plenum’s flagship catastrophe bond investment fund received a recognition of its sustainable investment qualities in being awarded the FNG Label by the German “Forum Nachhaltige Geldanlagen e.V.”

This labelling by FNG highlighted that the underlying assets invested in by the Plenum CAT Bond Fund, promote and work to safeguard sustainability as a form of reinsurance and risk transfer.

The FNG assesses all investment funds it labels each year and in 2019 Plenum Investments has received a higher accolade, with its Plenum CAT Bond Fund now being awarded with its first “star” under the FNG categorisation.

There are four levels of sustainability that the FNG assesses investment funds to, with the basic label the first, followed by one, two and three star awards.

These gradings are awarded based on numerous criteria of sustainability, environmental, social and governance factors (ESG).

This includes the institutional credibility of an investment offering, the standards enforced around the product and its allocations, the impact that the investment class makes, the manager’s selection strategy, how the manager engages in dialogue around the subject of sustainability and a range of ESG KPI’s.

“This year’s awarding of the first star honors our pioneering in this field and clearly demonstrates our ambition in this market segment,” Dirk Schmelzer, Fund Manager and Partner at Plenum Investments Ltd. commented. “This form of alternative risk transfer not only promotes, but essentially safeguards sustainability.”

Plenum highlights the role of insurance and reinsurance in providing disaster risk financing capacity, with the engagements of the capital markets through ILS and catastrophe bonds a way that this capacity has been enhanced and made more efficient.

It’s also enabled actors such as the World Bank to partner with countries to help them access the capital markets for disaster risk financing capacity, with catastrophe bonds an instrument that is increasingly being utilised and expected to be utilised more.

At the same time, Plenum highlights that the increasing interest in cat bonds as a source of disaster reinsurance and risk financing capacity is matched by the interest from investors, which is growing all the time as the ESG quality of the ILS asset class is increasingly noticed.

The ESG focus on cat bonds and ILS is increasing all the time, providing investors with another motivator for allocating to ILS assets, as they are considered a vehicle through which necessary post-disaster funding is channelled.

“Socially responsible investing implies emphasizing either the impact of an investment in catastrophe bonds or the related challenges. From this perspective, the optimization of capital resources in the insurance industry by transferring risks to the capital market is just a means to serve a good purpose, ” explained Nico Rischmann, founding partner of Plenum Investments Ltd.

The FNG Label aims to provide a level of quality assurance to investors looking for sustainable mutual investment funds, putting in place and continually working to improve quality standards for sustainable investment products.

We’ve written a number of times in the past (here, here and here) on the fact insurance-linked securities (ILS) and catastrophe bonds present a socially and environmentally responsible investment, given the key role the structures and their capital provides in managing and responding to natural disaster risks globally.

This is increasingly being recognised by investors, as well as by the ILS industry as a whole, seeing it as an opportunity to broaden the appeal of the asset class to new types of allocator.

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