The European Commission has launched a public consultation on the ESG ratings market and how credit rating agencies…
<p>To encourage CBIRC to explicitly require firms to consider ESG risks in new regulations for insurance asset management companies. </p>
PRI responded to the consultation. The PRI welcomes the amendments which attach great significance to corporate governance and risk management of insurance asset management companies. To ensure that IAMCs are appropriately managing ESG related risks and opportunities as a part of their obligations to clients, the PRI recommends that the proposed regulation should make clear that IAMCs must consider ESG factors in their corporate governance, risk management, investment activities, stewardship, and disclosure practices.
The proposed CBIRC regulation amends and replaces the Interim Regulations on Insurance Asset Management Companies, issued in 2004. It steps up the reform and opens up the financial sector while taking into account the challenges and development strategies of insurance asset management companies (IAMCs).
Apart from the insurance law, company law and the 2018 Guideline, which set high level rules and principles for the regulation of IAMCs, the CBIRC regulation will serve as the major piece of regulation for IAMCs in China. The PRI welcomes the amendments which attach significance to corporate governance and risk management at IAMCs. However, for IAMCs to pursue a long-term value increase of entrusted assets for the benefit of their clients or beneficiaries, they have to manage ESG-related risks and opportunities.
There are many ways for investors to manage ESG related risks and opportunities. Approaches are typically a combination of two overarching areas: ESG incorporation and stewardship. Policy guidance and support are crucial for investors to invest responsibly especially on the following aspects:
- specifying IAMCs’ duties include incorporating financially material ESG factors in their investment analysis and decision-making process consistent with their investment time horizons;
- setting out investors’ stewardship responsibilities to require investors to monitor corporate ESG performance, to engage with companies and vote proxies with the aim of improving ESG performance.