Good practice examples

Aviva provides 33 million customers around the world with insurance, savings and investment products. They are an asset owner with assets under management to the value of £510 billion, an insurer with IFRS gross written premiums of £31.2 billion, and Aviva Investors has assets under management of £346 billion.

Aviva’s climate change strategy is implemented as part of the Group Business Strategy and states:

“We commit to aligning our business to the 1.5 °C Paris Agreement target. We have focused our efforts through pragmatic, commercially smart actions and commit to be a net zero asset owner by 2050. Our businesses will seek to develop and offer further climate-friendly products. We also commit to further cutting our operational carbon impact, as well as using our influence to help tackle climate change. This is aligned to our Company Purpose ‘With you today for a better tomorrow’.” 

The Board Governance Committee met four times in 2019 to oversee how Aviva meets its corporate and societal obligations. This included setting the guidance, direction and policies for Aviva’s customer and corporate responsibility agenda, advising the Board and management on the assessment of the Group’s exposure to climate-related risks and recommending to the Board management actions to mitigate these risks and grasp opportunities. The Committee also approved the Group’s Environment and Climate Change Business Standard and ensured alignment with the Group’s strategy (NB this Committee has now been replaced by the Board Customer Conduct and Reputation Committee).
The Board Risk Committee manage and monitor all aspects of risk management and climate-related risks and opportunities were noted in four of the six 2019 meetings. Climate change is classified as one of the most material long-term risks to Aviva’s business model.

“For our customers and our business, addressing climate change and supporting the transition to a low carbon future represents the largest combined health, life, liability and general insurance contract that the world could sign-up to. The risks and uncertainty resulting from us not doing so are immense.”

Aviva is working collaboratively with the United Nations Environment Programme Finance Initiative (UNEP FI), industry associations, sector peers, academics, professional bodies, external consultancies, regulators and international agencies, including the Net Zero Asset Owner Alliance, to build robust, comprehensive and effective tools and approaches.

Aviva was awarded the Climate Risk Initiative of the Year 2020 by InsuranceERM, noting the: “Climate value-at-risk (VaR) initiative shows the practical benefits that can be achieved when insurers focus resources, time and expertise on climate risk management, as well as collaborating with other knowledge partners.”

Aviva Investors approach to implementing the Group strategy is based on the three pillars of:

1. Responsibility Built-in
2. Connected Thinking
3. Powering Change.

Responsibility Built-In involves integration of ESG into the investment analysis and decision-making process across all asset classes. The responsible investment policies sit within a tiered framework that ensures all policies maintain consistent principles, and that any positions agreed at an institutional level cascade down and are implemented across each asset class.

Aviva’s investment teams are supported and upskilled by a Global Responsible Investment (GRI) Team, where 22 ESG analysts act as a centre of excellence generating a robust qualitative and quantitative research foundation, providing macro, thematic, industry, security and asset-specific qualitative ESG insights. There are also 14 analysts within their broader GRI team, responsible for producing internal ESG research. This research is communicated to financial analysts and portfolio managers, primarily through notes and reports published on the Aviva Investors Internal Research Hub (IRH).

They maintain proprietary ESG data models synthesizing internal and external data to give investment teams quantitative assessments of ESG risks at a security and portfolio level. The proprietary tools dashboard aggregates the ratings of the different types of ESG risks of each counterparty in the investment universe. The Aviva Heatmap Algorithm (AHA) score provides a metric for a company's exposure to and management of ESG risks. Through 2019 the AHA model was further enhanced in collaboration with Quantum, the data science team supporting their affiliate insurance businesses. The results have been very encouraging. They have noted significant performance differentiation between the top third of ESG-ranked companies and both lower ranked companies and the overall MSCI World benchmark.

They offer a range of responsible investment outcomes across their product range for customers designed to meet diverging ESG needs. These tend to be combinations of four key ESG investment approaches: integration, engagement, positive screening and negative screening.

Remuneration plays a role in incentivizing a focus on sustainability: support for ESG integration is among the criteria considered as part of their investment teams’ annual evaluation and compensation framework.

Powering Change involves active ownership through engagement, voting and market reform. Since 2001 they have had a policy to withhold support for a company if its disclosure on ESG issues is absent or non-existent; this would include an analysis of disclosure on climate-related issues. Their 2019 voting and engagement highlights are:

“We voted on 61 876 resolutions at 5 382 shareholder meetings, representing 24% of votes against management resolutions including 46% of pay proposals. We undertook 3 122 company engagements with 2 149 individual companies to identify and reduce ESG risks in our portfolios.

During 2019 we co-led an engagement with BP as part of our Climate Action 100+ collaboration and co-filed a shareholder resolution requiring the company to disclose in how far the group’s capital allocation framework reflects the goals of the Paris Agreement. Following our engagement work, BP announced a Net-zero ambition in February 2020.”

Beyond engagement, they believe their role as investors is to support market reform and advocate policy measures that encourage longer-term, more sustainable capital markets. Through their market reform work they aim to correct market failures such as a lack of corporate disclosure on ESG risks and climate change to improve long-term policy outcomes. A key achievement has been the Corporate Human Rights Benchmark (CHRB). Founded largely through Aviva’s thought leadership and funding, it is a free and publicly available benchmark which ranks companies in the agriculture, apparel, and extractive sector on their human rights policy, practice and performance.

Connected Thinking is belief in the power of connections and connected thinking. By connecting insights and perspectives they can better understand complex sustainability trends. As a large, global player with ESG integrated across all asset classes and locations they have unique access to a wide range of information about ESG risks and opportunities across the economy.

“Creating a sustainable future and delivering long-term investment returns can only be accomplished by working together with colleagues, clients, competitors, policy-makers and regulators to connect different perspectives, share knowledge and experience.

We connect stakeholders to build award winning sustainable institutions that deliver for everyone, such as the World Benchmarking Alliance (WBA). We worked with the UN Foundation, BSDC, and the Index Initiative to create the WBA. The WBA’s mission is to provide access to information that indicates how companies are contributing to the SDGs. It will do so by developing free and publicly available corporate sustainability benchmarks that rank companies on their sustainability performance.”