SBAI to publish toolkit on implementing ESG in ILS strategies

The Standards Board for Alternative Investments (SBAI) has this morning announced the launch of its first toolkits targeted at asset managers and allocators to help them with the practical implementation of responsible investment across certain alternative investment strategies and asset classes.

The SBAI has been ramping up its focus on environmental, social and governance (ESG) alongside responsible investing and these guides are the latest step to try and bring some standardisation around adoption of these practices and to help allocators understand what’s required, from themselves, funds and managers.

The toolkits, which are the result of the work within the SBAI’s Responsible Investment Working group that is made up of some 150 professionals from over 140 asset managers representing over $1 trillion in AUM, are memos that first cover credit, equity long/short, macro, and systematic asset class strategies.

The toolkits consider asset class, instrument, portfolio concentration, and average holding periods and are tailored to each asset class.

Encouragingly, the next asset class to be covered will be insurance-linked securities (ILS), with a toolkit memo to be published in the near future.

Bradley Belt, Vice Chairman of Orchard Global Asset Management, commented, “The SBAI’s work on Responsible Investment is a valuable contribution to the ongoing discussions on integration of ESG risk factors into investment decision-making. In highlighting the need for different approaches, it makes an important distinction between rigorous investment processes which account for any financially material risks, including ESG risks, and pursuing investment strategies with dedicated ESG objectives. This latest SBAI guidance enhances asset manager and allocator understanding of the ESG issues that are relevant to both the strategy and the asset classes traded.”

Maria Long, Research and Content Director of the SBAI, added, “Our mission is to solve for better and improve industry outcomes. Our Working Group discussions have highlighted the importance of allocators and asset managers being able to have conversations that take into account the nuances of different alternative investment strategies. Through collaboration with our community of asset managers and allocators, this toolkit provides guidance on implementing robust and thoughtful frameworks and provides key topics for discussions between asset managers and investors to ensure any ESG objectives are aligned.”

With ESG investing considered a significant opportunity for the insurance-linked securities (ILS) market and reinsurance investments, this guidance derived from leading asset managers and allocators will prove useful and should help to propel the ILS asset class forwards, as it looks to embrace and become more attractive to ESG allocators.

ESG investing and the opportunities it presents are a growing focus for the insurance-linked securities (ILS) market. Read more of our insights on this topic here.