Interview with Dr. Thomas Kabisch (MEAG) – “We acknowledge our responsibility.”

How is Munich Re's understanding of corporate responsibility reflected in its capital management? In this interview, MEAG CEO Dr. Thomas Kabisch explains why assuming ecological and social responsibility also makes economic sense.

Dr. Kabisch, MEAG bases its investments on sustainability. Does a good conscience not have a negative impact on yields?

On the contrary, sustainable development is not only a matter of morals or having a clear conscience – it is also about financial success. We have identified sustainability as an extremely profitable investment topic. Practical experience has shown that in comparison with conventional investments, we can systematically generate higher returns from sustainable investments with a higher probability and at the same level of risk.

Sustainability is on everyone’s lips these days. What do you understand by it?

We are committed to our responsibility as a global group – our corporate responsibility. This means we take equal account of economic, ecological and social aspects in our entrepreneurial activity. We are conscious of an obligation to our stakeholders, but also towards the environment and society. This is why our asset management follows the approach of » socially responsible investing (SRI).

What does that actually mean in practical terms?

Our economic, ecological and societal commitments are inextricably linked. Munich Re has been investing according to sustainability criteria for many years now. For us, this kind of investment is an established component of our risk culture. Good risk management helps us avoid risks that are difficult to assess and sharpens our awareness for risk-adequate returns. The prospects for investments in companies with sustainable business practices are better in the long term than conventional investments: not only do they have significantly fewer liability and reputational risks, they also have more satisfied employees. Promoting good employee treatment is not only part of our social responsibility – this factor also has a positive influence on companies’ productivity.

You have described the economic and social aspects of your sustainable approach, which also includes investing according to SRI criteria. Where exactly do the benefits of sustainable investments lie?

First and foremost, they contribute to tackling global challenges such as climate change. And not only that: finding solutions to such global problems brings with it a promise of high innovation, growth and thus performance potential. Companies that use raw materials effectively and thus save costs, that rely on regenerative energy sources and gain independence from oil prices, that develop future technologies and thus tap into new markets, are well positioned. And that too has a positive effect on a company’s success.

Insurance companies like Munich Re have recently had to fend off accusations that they slept through the latest stock market rallies.

It must be quite clear to these critics that the financial crisis could have intensified even further. Then the losses would have been higher. Our credo is and will remain that we must never jeopardise our security. Munich Re has always fared well with an investment policy based on conservative values. Our clients have always been able to rely on our stability. And even in future they can be assured that our operations will be guided by a strong sense of responsibility. Our conviction lies in sustainably generating positive returns with security and social responsibility.

MEAG has set up three sustainable investment funds. What are the main areas they focus on?

We established the international equities fund “MEAG Nachhaltigkeit” back in 2003. Five sectors are consistently excluded: tobacco, alcohol, gambling, armaments and firearms. We invest around 80% of the fund’s assets in international blue chips listed in the Dow Jones Sustainability Index ex All which have proven to be sustainable. The remaining 20% is placed in the shares of small to medium-sized companies with high growth rates and innovative and sustainable business practices. These are the hidden champions which deal in technologies or services such as alternative energies or recycling. The “MEAG KlimaStrategie” equity fund is geared to systematic investment in companies that concern themselves with climate change, either by developing measures to adjust to the consequences of global warming or by providing solutions to reduce greenhouse gas emissions. And “MEAG FairReturn”, which we also made accessible to private investors for the first time in 2010, is a mixed fund largely comprising European securities which we select taking sustainability criteria into account. Our investment objective is positive performance in line with the capital markets. After all, we intend to generate plannable earnings. This fund is thus suitable for reinvesting benefits from maturing life and annuity insurance policies.

How successful can one be on the stock exchange with sustainability funds?

The prospects for sustainable investments are good here, too. As studies of opportunity/risk profiles by international rating agencies such as Morningstar have shown, sustainability funds can indeed generate better results than traditional equities. This was particularly apparent during the economic and financial crisis.

How do you ensure that investments in selected companies or new technologies prove worthwhile?

In this we benefit particularly from the expertise pooled in Munich Re as a Group. For example, if no insurance solution is offered for certain offshore wind farms owing to indeterminable risks, we base our investment decision on the relevant knowledge available from our reinsurance business.