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Original Risk: A Society for Change Agents

Plenum catastrophe bond & ILS funds get ESG accredited again


For the fourth year in a row, Zurich based specialist catastrophe bond and ILS investment manager Plenum Investments has been accredited with the sustainability FNG Label by the German “Forum Nachhaltige Geldanlagen e.V.” (FNG) for its cat bond focused strategy.

plenum-investments-logoAt the same time, Plenum has also achieved a sustainability label for its Insurance Capital fund, which invests in catastrophe bonds and private insurance debt, for the second time.

Now, Plenum’s CAT Bond Fund, which has a track record of more than a decade, has been awarded the FNG Label four year’s running.

The manager’s newer Insurance Capital Fund strategy has now received a one star FNG Label two year’s running as well.

There are four levels of sustainability that the FNG accredits an investment fund with, starting with a basic label which Plenum’s cat bond fund first achieved back in 2018, followed by one, two and three star awards.

Sustainable investment gradings are awarded based on a range of criteria related to sustainability, environmental, social and governance factors (ESG) of a strategy.

These include: the institutional credibility of an investment offering; 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 other ESG KPI’s.

“The award of the FNG label acknowledges our many years of pioneering work and reflects our ambitions in this market segment,” explained Dirk Schmelzer, who has led Plenum’s environmental, social and governance (ESG) analysis approach to catastrophe bonds.

“Our form of analysis allows ESG investors to invest according to their vision. In line with the European SFDR regulation, we are pressing ahead with our pioneering work,” Schmelzer added.

Plenum believes the insurance-linked securities (ILS) market has a strong ESG-positive message and provides valuable resilience building capacity.

“The capital market is becoming more and more aware of its responsibility as a bearer of natural disaster risks and plays its part in mitigating the negative effects of climate change,” Plenum explained.

Adding, “The long-term mega trend toward increasing insurance losses entails a growing need for protection which in turn continuously raises the demand for insurance cover.”

The ESG-relevance of the ILS and catastrophe bond asset class is only likely to increase, as global demand for insurance and reinsurance protection against catastrophes, severe weather and climate change increase.

While challenging to look through ILS transactions to definitively say that every policy and policyholder underneath adheres to ESG guidelines, the asset class has a sufficiently beneficial impact on global resilience to make it fit within many institutional investors ESG buckets.

“Demo­graphic and economic shifts as well as climate change in specific regions are the major growth drivers of the (re)insurance industry,” Plenum said. Adding that, “Investors appreciate not only the currently attractive insurance premiums, but also the exceptionally high diversification potential inherent in the CAT bond asset class.”

ESG is expected to become increasingly strategically relevant for the ILS asset class, making efforts to align with ESG standards critical for those asset managers who want to tap into investor interest in sustainable and resonsible, or ESG-aligned investment opportunities.

Also read:

ESG a prerequisite for the future of ILS: Plenum’s Dirk Schmelzer.

ESG has huge strategic relevance for risk transfer & ILS markets, survey finds.

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