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Carbon intensity

Climate-related portfolio ambitions of the Swiss Life Group

Paris Climate Agreement

In the context of its PAM portfolio – securities, real estate and infrastructure – Swiss Life’s ambition is to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development and thus contribute to a central goal of the Paris Climate Agreement.

In addition to other metrics in the context of the PAM securities and real estate portfolios, Swiss Life works with the carbon intensity. The carbon intensity is an indicator of greenhouse gas efficiency. For government bonds, the metric reflects greenhouse gas emissions in relation to nominal gross domestic product (GDP) and for corporate bonds and equities, the metric reflects greenhouse gas emissions in relation to sales. For real estate, the metric reflects greenhouse gas emissions in relation to floor area.

In the context of greenhouse gas accounting following the GHG Protocol Corporate Standard, the carbon footprint of Swiss Life’s PAM securities and real estate portfolios corresponds to a subset of Swiss Life’s Scope 3 emissions: It correspond to categories 13 “Downstream leased assets” and 15 “Investments”.

Weighted average carbon intensity of the Swiss Life Group’s PAM securities portfolio1 as at 31 December 2021

Asset class   Unit   2021 2
Government bonds   t CO2e/USD million GDP nominal   188
Corporate bonds   t CO2e/USD million sales   148
Equities   t CO2e/USD million sales   142
1 In the context of the TCFD Report, government bonds only comprise bonds issued by nation states. Corporate bonds also include covered bonds as well as bonds issued by state-affiliated companies and supranationals. This deviation from other financial publications is due to the calculation logic underlying the carbon intensity. The slightly refined methodology does not lead to significant changes in the weighted average carbon intensity values.
2 The weighted average carbon intensity values correspond to more than 90% of the amortised costs of the analysed PAM government bond portfolio, more than 90% of the amortised costs of the analysed PAM corporate bond portfolio and more than 90% of the market value of the analysed PAM equity portfolio of the Swiss Life Group. © 2022 MSCI ESG Research LLC. Reproduced by permission. Data from MSCI ESG Research LLC is as at 31 December 2021.

The weighted average carbon intensity values of both Swiss Life’s PAM government bond portfolio and Swiss Life’s PAM corporate bond portfolio have remained at their prior-year level. The weighted average carbon intensity of Swiss Life’s PAM government bond portfolio reflects the strong presence of domestic markets.3 In addition, 100% of Swiss Life’s PAM government bond portfolio is invested in countries which have ratified the Paris Climate Agreement. The weighted average carbon intensity of Swiss Life’s PAM corporate bond portfolio reflects the strong presence of service-related industry sectors.4 Since partially replicating equity index strategies are pursued for the PAM equity portfolio, the weighted average carbon intensity of the PAM equity portfolio is not affected by targeted over- and underweighting based on selected characteristics. Swiss Life’s PAM securities portfolio currently has a lower overall weighted average carbon intensity than relevant benchmarks.

3 As an example, Switzerland has a lower carbon intensity than many other countries.

4 On average, service-related industry sectors have a lower carbon intensity than other industry sectors.

Among other criteria, Swiss Life aims at bond investments in countries and companies with a low overall carbon intensity. However, as an investor, Swiss Life cannot directly control the carbon intensity of the issuers.

Swiss Life can directly influence the carbon intensity of the directly held PAM real estate portfolio. Real estate is a major contributor to global CO₂ emissions and at the same time exposed to climate-related risks. As one of Europe’s leading real estate investors and owner of Switzerland’s largest private real estate portfolio, Swiss Life is aware of its responsibility concerning the transition to a low-carbon economy.

In 2021, Swiss Life elaborated a reduction target for the carbon intensity of its directly held PAM real estate portfolio. The reduction target is based on current best practices and is in line with the goals of the Paris Climate Agreement.

Swiss Life has set itself the target of reducing the carbon intensity of its directly held PAM real estate portfolio by 20% by 2030 compared to 2019. A total of around CHF 2 billion will be invested over this period in order to achieve this goal. The measures include, among other things, the implementation of energy efficiency and CO₂ efficiency measures and the switch from fossil to non-fossil energy sources. To monitor the achievement of these objectives, Swiss Life also introduced a specially developed cockpit which it integrated into its existing IT systems.

WSGE_DP_graph_responsibility_CarbonIntensity

With a carbon intensity of 26 kg CO₂ equivalents per square metre floor area, the starting point for 2019 is already well below the global net-zero target of the real estate sector. This starting point is also below the net-zero scenario benchmark of Swiss Life, which reflects the specific composition of the directly held PAM real estate portfolio of Swiss Life in terms of geography and investment type. With the further reduction by 2030, Swiss Life is aiming for a carbon intensity of 20 kg per square metre floor area.