Zurich Life undertakes active ownership of its investee companies through exercising shareholder voting rights and engaging with investee companies directly. Voting is executed across Zurich’s entire directly managed equity portfolio with agreed approaches across a wide range of issues on corporate governance and other key ESG factors with full voting records publicly available online. On engaging with investee companies Zurich has put in place a framework to engage with some of the largest carbon emitters through direct meetings. This combination of active engagement and active voting is recognised as a key feature of responsible investing.
Active ownership case studies
Responsible Investment engagement by Zurich Life
€13.4bn
equity assets that include an ESG consideration
2.1bn
corporate bond assets that include an ESG consideration
8,700
companies covered by MSCI for ESG factors
10,200
resolutions we voted on
850
resolutions we voted against management on
330
330 company engagements across our equity regions
Active voting
Vote for
We encourage the move from fossil fuel energy generation to renewables where we can as part of our support of the Paris Accord on limiting climate change. We do this by supporting management strategies to divest coal, oil and gas assets in favour of investment in renewable and clean technologies. We also support shareholder resolutions on greater disclosure of climate exposures. We invest directly in companies involved in the manufacture of renewable energy equipment which should benefit from the long-term trend towards wind, solar and other carbon free energy solutions.
Vote against
Our most frequent votes against management recommendations are in the area of governance and compensation plans. We will vote against the re-election of directors who we believe, for example, serve on too many boards. We will also vote against what we believe are excessive compensation plans and those which are not demanding enough to achieve. To give an example, we voted against the re-election of the chief executive of a German building materials company. Our primary issue was the misallocation of capital at the company – one example was a value destroying acquisition in another country when capital returns to shareholders would have been a better use of resources and actually had been a prior management commitment.
High ESG rating
Zurich Life has a long-term holding in a Taiwanese technology company which has had a consistently high ESG rating. We meet and speak with the company regularly and are consistently impressed with its strategy for sustainable value creation. The company’s corporate governance is excellent to the benefit of all stakeholders. The company has a strong commitment to being a technological lead, through cutting edge research and development. It also partners well with its customers and its highly qualified and motivated staff has driven long-term success, and exceptional investment returns. Occasionally, well-funded new entrants to the industry appear as a threat, but the company’s track record and innovative mind-set give us confidence to maintain our holdings, and also add to them as opportunities arise
We invest in a US healthcare company which specialises in the treatment of sleep disorders. As populations age, this is likely to become an increasing area of concern requiring solutions. The company is very well governed with strong employee engagement, protection and advancement practices. It ranks towards the top of its peer group when these ESG factors are considered. The company has developed and maintained a high quality and innovative product offering driving strong growth in sales and profits over time. Product recalls, which can be a feature in the healthcare equipment industry, have fallen and it conducts regular supplier audits to maintain ethical practices.
Low ESG rating
We currently do not hold a position in what appears to be a ‘cheap’ Chinese auto parts company because of our expectations in relation to the transition to electronic vehicles from the more traditional fossil fuel based engine. The Chinese car market and local production has grown strongly over the last decade. However, we are concerned that climate change and pollution will drive increasing promotion and adoption of electrical vehicles over traditional petrol and diesel cars. This company is not well positioned for this transition having not disclosed a strategy to participate in this emerging trend. Profit growth with this backdrop will be challenging at best and it is likely that the existing earnings base is in jeopardy.
We currently hold a position in a US insurance company despite a lower than average ESG rating. The low rating primarily results from the exposure to extreme climate events and catastrophe losses. However, we believe the company is well managed and able to price the risks of such insurance policies appropriately. This protection will be in even greater demand as the incidence of weather damage increases, with pricing in this area strong with resilient earnings. This may drive solid medium to long-term shareholder returns for this attractively valued investment. The company has engaged in a certain amount of divestment and acquisition activity in recent years which can lead to risks of business disruption. However, it appears these deals have enhanced rather than detracted from the company’s ability to generate sustainable value.