Identification, assessment and management of sustainability aspects
Swiss Life does not regard climate risks as a new and independent risk category, but as a risk driver that may impact existing risks. This is in line with the BIS1 definition. Climate-related financial risks can therefore be assigned to traditional risk categories such as credit, market or insurance risks. To date, no standard has been established for translating climate-related financial risks to the traditional risk categories. Swiss Life works with what is currently the best alternative method of identifying, evaluating and appropriately managing climate risks: using a variety of climate metrics.
As part of its Group-wide sustainability strategy, Swiss Life is also integrating sustainability and climate-related aspects into its existing risk management standards for the management of the business. The identification, assessment and adequate management of climate-related risks are embedded in both the qualitative and quantitative elements of Swiss Life’s risk management.
On the qualitative side, the identification of climate-related risks is included in the “emerging risks process”. In addition, the structured processes for determining the comprehensive risk profile include climate aspects. Swiss Life also plans to integrate climate-related risks into its existing internal control system in connection with the new legal obligation regarding transparency around non-financial matters. As part of this process, opportunities are to be created to manage in particular those climate risks which have a significantly negative impact on target achievement. In addition, reputational damage and increased supervision are to be taken into account as possible consequences of climate risks.
Swiss Life considers physical and transition risks to be strategic risks for the business model. Consequently, relevant climate aspects are taken into account in business management. In addition, as part of the ORSA, Swiss Life examines scenarios related to climate change, both at Group level and at the level of the various divisions. Swiss Life does not expect any material effects of climate-related financial risks within the ORSA planning horizon. This is reviewed annually as part of a regular process.
On the quantitative side, for the identification, assessment and appropriate management of climate-related risks and other sustainability aspects of investments, Swiss Life systematically integrates sustainability indicators, such as greenhouse gas emissions and ESG ratings from external data providers. Swiss Life has a structured process to take sustainability-related criteria into account as part of its investment decision process. Swiss Life is continuing its work on expanding its quantitative risk management standards in order to include the systematic identification, assessment and appropriate management of climate-related risks on both the asset and liability sides of Swiss Life’s balance sheet.
1 Bank for International Settlements, 2021. Basel Committee on Banking Supervision: Climate-related risk drivers and their transmission channels