By leveraging our active ownership capabilities, we aim to seize the best investment opportunities to build more resilient portfolios with better risk-adjusted returns on long-term investments for our clients.
Approach of Generali Insurance Asset Management
Our main objective is to promote sustainability practices and good governance within our investee companies. This is done by way of active engagement and participation at general meetings and through cultivating a trusted relationship with the companies we invest in.
GIAM acts on two levels:
ENGAGEMENT WITH COMPANIES
2022 Voting figures
2022 Overview of Engagement activities
Engagement by ESG Topics
Human Rights 5%
Engagement by intensity
Engagement by country
Czech Republic 1%
Papou New Guinea 1%
Engagement by type
3 pillars of impact engagements
1 - Focused preparation to create added value
To maximize "return on commitment" we focus on the largest exposures, with the highest ESG risk and a probability of significant engagement success. One or two topics are prioritized, aiming to avoid dispersion. We try to begin with a level of expertise that will allow us to create a relationship of trust with the company. We strive to involve all internal actors who interact with the company (financial analysts on credit and equities, ESG analysts, portfolio managers) to be able to define an internal view and deliver a coherent message to each interaction. The result of this iterative process is the identification of tipping points, tools and experts that are potentially useful to the business.
2 - Building a partnership to create common added value via negotiation
We then move to the creation of a partnership relationship with the company. The first challenge is to overcome the historical vicious circle that links company and investors: the investor judges, the company has a perfect façade and therefore the investor is suspicious. This goes through very human mechanisms where preparation creates a ground of trust, until the company agrees to work with us and says "I don't know, let's work together", for example. The biggest added value comes from negotiating a priori irreconcilable point of view. This requires a lot of listening, creativity and a spirit of innovation, without giving up the initial requirement. The result of this step is the definition of a concerted plan with the company to address expectations.
3 - Creating or joining coalition of investors
Eventually, we create (when possible) a coalition of investors. This comes only once we have defined a framework with the company. This avoids the pitfall of the “lowest common denominator” effect. Several times a company itself has offered to bring together other investors around the defined framework to accelerate the change that is taking place internally. This continues the dynamic of collaboration that facilitates the recognition of our impact. Finally, we ensure that the governance of this collaborative initiative is clear in terms of duties (efforts) and rights (recognition if successful).
ČEZ: a successful case study
ČEZ is one of the leading energy companies in the Czech Republic. At the General Meeting of CEZ in June 2020, we stressed the importance of having their strategy validated by the "Science Based Target Initiative" (SBTi). We held an introductory workshop between ČEZ and CDP (coordinator of the SBTi), suggesting that our fellow Climate Action 100+ investors join us as well. As co-lead of the CA 100+ discussions, we reiterated this expectation. Then, in January 2022 we met Kateřina Bohuslavová, the new Head of Sustainability at ČEZ and again highlighted the importance of SBTi.
On 23 June 2022 ČEZ publicly announced that it had obtained the Science Based Target validation "well below 2°C by 2030" for its climate strategy to 2030 (carbon intensity reduction from 0.38 tons of CO2 per megawatt-hour in 2018 to 0.16 in 2030). We would be in favor of an alignment at 1.5°C.
However, for a company with 4.8 Gigawatt of coal in 2020 and 37% of coal in the energy mix, this result would be an excellent example for all emitters in countries whose energy mix is heavily dependent on coal. CEZ had 8.1 GW in 2015 and an exit is now planned in 2038. Knowing the many geographical constraints in the Czech Republic and given the geopolitical situation, it is worth stressing the importance of this result.
“The cooperation between ČEZ and Generali is now in its fifth year. The on-going bilateral dialogue with Generali, as well as wider discussions within the CA100+ (Climate Action 100+) initiative, have helped us to further improve our communication regarding our coal exposure and emissions reduction.
The feedback from investors and from financing banks has contributed significantly to the ČEZ Group’s decision to modify its strategy and put more emphasis on ESG topics. As a result, we published the accelerated strategy of the ČEZ Group under the new name Clean Energy for Tomorrow in May 2021. This strategy includes more ambitious commitments on decarbonisation, which will be enabled by faster closure of our coal plants and 6000 MW of new renewables capacity by 2030.
This strategy also increased our focus on ESG policies and set specific ESG KPIs. We particularly valued our discussions with Generali on the importance of setting emission reductions targets in-line with the SBTi guidelines. Following the announcement of the accelerated strategy, we were able to send a commitment letter to SBTi, join their initiative Business Ambition for 1.5°C. 1 and submit our carbon reduction targets for validation.
All these steps were taken in 2021 and our cooperation with Generali and CA 100+ have helped in onboarding the relevant people within the ČEZ Group.”
Barbara Seidlová, ČEZ Head of Investor Relations – March 2022