Swiss Re, the insurance group, has joined a growing collection of large investors to adopt principles of socially responsible investment (SRI), saying it is switching its entire $130bn portfolio into ethical indexes.
The world's second-largest reinsurer said it expected to complete its move later this year, and will base its investment on environmental, governance and social (EGS) indexes compiled by MSCI.
Momentum in ethical investing
A growing number of large investors have recently made similar decisions. This year, fellow insurers Axa, Scor and Aviva, along with Calpers, the California state pension fund, have all pledged to remove tobacco investments from their portfolios.
And in just the last few days a coalition of 79 institutional investors with close to $8tn under management between them wrote to some of the world's largest companies for disclosure on employment practices.
Swiss Re said in a statement that it was "convinced that taking ESG criteria into account makes economic sense and reduces downside risks especially for long-term investors."
MSCI, the global index compiler, already has $58bn in assets benchmarked to its ESG indexes, which include investment themes such as governance quality, low carbon and environmental investing.
"There's a growing awareness about how powerful choices in finance can be," said Huw Davies, head of retail banking at Triodos Bank, which recently launched a sustainable investment current account.
Europe leads the way
It is estimated that close to $23tn is under management globally by investors incorporating EGS principles into their strategies, and more than half of this is in Europe.
Taking a more ethical approach to investing has gained momentum in recent years, and recent research by State Street suggests that up to 80% of institutional investors have some form of ESG strategy in their portfolios.
"There does seem to be a general shift towards sustainable investment," said Davies at Triodos.
"It's got a long way to go, but when you look at some of the younger investors and their attitude to business it bodes well for the future."
Swiss Re formalised its commitment to sustainable, responsible investment in 2007 joining the UN-backed Principles for Responsible Investment, but it is the first major financial services group to commit fully to EGS principles.