This article aims to explore how the inclusion of Environmental, Social, and Governance (ESG) criteria became a critical part of the management of Buy & Maintain (B&M) portfolios for insurers and other long-term investors and why we consider that the addition of new climate-aware guidelines such as temperature or carbon intensity should be implemented in all B&M portfolios, when possible, subject to a sound engagement policy.
While early bird institutional investors started to incorporate ESG criteria in their portfolios some years ago, the trend intensified in 2021 with the Covid-19 crisis and the introduction of the new European Sustainable Finance Disclosure Regulation (SFDR) that encouraged investors to opt for more ESG transparency. B&M institutional investors showed a strong preference for asset managers to position their portfolios in the Article 8 category (portfolios that promote environmental and social characteristics in their investment strategy), rather than the more mainstream Article 6 definition.
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