For insurance portfolios, for reducing the carbon footprint given the limited turnover possibilities, we adopt a gradial asset rotation approach, exiting from poor ESG-rated assets gradually while pushing for change in activist approach via our engagement activities. From an insurance investment standpoint, the expectations in terms of transition risk will most probably result in heightened pressure on prices of high carbon footprint assets.
We expect Central Banks to intensify pressure on poor ESG-rated corporates over the coming months increasing de facto the ESG premium. Climate change is not yet part of the mandate of major central banks, but the implied medium-term threat to price stability is leading them to start tackling this risk. We take a closer look at the implications expected from the climate strategy of the European Central Bank, in particular the greening of corporate bond purchases and banking regulations.
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