Identification, assessment and management of climate-related risks
Swiss Life considers climate-related risks to be drivers that may impact existing risk categories. This is in line with the definition of internationally active bodies and institutions and (national) supervisory authorities1. Accordingly, expected climate-related financial risks are embedded in the classic risk categories such as credit, market or insurance risks and are reflected in the market. No standard has yet been established. For this reason, Swiss Life is currently working with qualitative analyses as well as various climate-related metrics and climate-related projections to identify, assess and appropriately manage climate-related risks.
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.
In qualitative terms, for example, climate-related aspects are included in the emerging risks process. In addition, the structured processes for determining the comprehensive risk profile encompass climate-related aspects. Swiss Life considers physical and transition risks to be strategic risks for the business model. Consequently, relevant climate-related 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 risks within the ORSA planning horizon. This is reviewed annually as part of a regular process. Furthermore, qualitative analyses to assess climate-related financial risks are carried out with relevant internal stakeholder groups.
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. This is supplemented by special mid- and long-term analyses based on the scenarios of the Network for Greening the Financial System (NGFS). For this purpose, climate-related projections of the NGFS are used.
Analysing and understanding climate-related metrics is considered essential if Swiss Life is to be able to assess and appropriately manage climate-related risks and opportunities within the investment portfolio. Swiss Life has a structured process to take sustainability-related criteria into account as part of its investment decision process.
1 For example, the International Association of Insurance Supervisors (IAIS), the European Insurance and Occupational Pensions Authority (EIOPA), FINMA, the Autorité de contrôle prudential et de resolution (ACPR) or the German Federal Financial Supervisory Authority (BaFin)
As a life insurance company and based on the markets in which it operates, Swiss Life considers the climate-related risks on the liabilities side of the balance sheet to be low. That is why the assets side of Swiss Life’s balance sheet is currently the focus of quantitative analyses of climate-related risks. An expansion of the quantitative risk management standards for the systematic identification, assessment and adequate management of climate-related risks on both the asset and liability sides of Swiss Life’s balance sheet is still in progress.
In addition to climate-related financial risks, Swiss Life also identifies, assesses and records the impacts caused by its business activities and, where relevant and proportionate, by its business relationships and the associated key risks for relevant stakeholder groups. This is supported, for example, by an internal climate experts group and representatives of relevant stakeholder groups.
For the prevention of “greenwashing”, Swiss Life emphasises clear and transparent communication with its stakeholders in which sustainability aspects, including climate-related aspects are addressed. In the case of investment products in particular, it ensures that adequate control mechanisms exist and that definitions are based, where appropriate, on established industry standards. These control mechanisms include, for example, periodic reports depicting the key sustainability aspects of a portfolio and serving as a basis for discussion in certain bodies (e.g. the Risk Committee). Swiss Life also meets the current regulatory and supervisory requirements of the respective jurisdictions in the European Union as well as those of FINMA.
Further information can be found in the Sustainability Report, available at www.swisslife.com/sustainabilityreport (“Materiality analysis” section).