AIG’s insurance companies generally receive premiums and deposits well in advance of paying covered claims or benefits. In the intervening periods, we invest these premiums and deposits to generate net investment income that, along with the invested funds, is available to pay claims or benefits. Our investment strategies are tailored to the specific business needs of each operating unit. The primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus.
Our investment approach focuses on identifying and evaluating risk at all levels, as we believe good relative value decisions are driven by a comprehensive understanding of risk.
In our view, sustainable investing includes embedding into our decision-making process the anticipated impact of all types of risks, including ESG factors. As investment stewards and corporate citizens, we recognize our responsibility to contribute to a resilient financial market system that reflects the values of our clients and their communities. Our ability to identify and appropriately respond to ESG challenges and opportunities is a critical driver of competitive advantage, and, in turn, the ability to achieve client objectives. Therefore, we are committed to integrating ESG factors into our investment process and the operations underpinning those investments.
In 2021, AIG Investments launched a formal ESG Investment Program, which encompasses four pillars:
For several decades, AIG Investments’ municipal bond team has been investing in bonds that finance improvements to public drinking water supplies and water treatment infrastructure; the maintenance, expansion and energy efficiency of public transportation; access to affordable housing; access to public education and public healthcare and projects that improve energy efficiency and grid connectivity and increase the use of renewable energy.
Additionally, AIG Investments’ private infrastructure debt team has been a leading investor in renewable and green energy projects for more than 35 years. The team has developed an expertise in analyzing these types of projects and recognizing the long-term value benefits and societal preferences for renewable and green energy alternatives. As of November 30, 2021, AIG has a total of $3.5 billion invested in private wind, solar, geothermal and hydroelectric generation and transmission projects, solar power purchase agreements (PPAs) and commercial and residential PACE (Property Assessed Clean Energy Program) loans (see Table 1). In 2021, AIG invested in a number of solar and alternative energy projects, including:
$120 million in a portfolio of 446 distributed-generation and utility-scale assets across 23 states, including California, New Jersey and the New England region. The portfolio operates 446 MW of gross capacity, which is enough electricity to power over 73,000 homes. Distributed solar power generation provides solar energy resources by installing generation tools and technologies in proximity to the end users of the power. For example, a solar power generation system can be installed on rooftops of houses and commercial buildings that will then use the energy.
$160 million in a pair of wind farms in Norway, including one of the largest wind power parks in the region. The wind farms operated a combined 2,146 MW of gross capacity, which can power over 105,000 homes. Norway, Denmark and Sweden source a significant amount of energy from renewable resources, which has allowed for the electrification of a large energy-intensive manufacturing sector and the widespread use of electricity for heating.
Other sustainability-driven investment highlights include a total of $2.2 billion of “green bonds” earmarked for climate-related or environmental projects purchased by our public credit desk through December 31, 2021.
Our High Grade Corporate Credit team integrates ESG and climate issues into their reviews of certain sectors in our portfolio including the Energy Exploration and Production Sector. For example, the team:
- Assesses climate and carbon emission targets, including net zero goals for all issuers
- Assesses earnings calls and the time spent on ESG issues including carbon emissions through the use of technology
- Compares percent capital expenditures with respect to low-carbon technologies across issuers
- Considers Scope 1, 2 and 3 emissions in metric tons of CO2e (where data is available)
AIG Global Real Estate also considers climate-related risks and sustainability initiatives as part of its investment process. Considerations include flood plains, green certifications, water efficiency, upgrades to HVAC, water heating and other energy efficiency equipment and energy generation from renewable sources.
2. 2021 figures are from 1/1/2021–11/30/2021 due to the Blackstone transaction that took effect in December 2021.
In 2021, AIG Investments undertook the following actions:
- Initiated the development of our first ESG Investment Policy Statement to summarize our intention to integrate ESG considerations across our investment processes.
- Initiated an assessment of ESG data vendors to support the integration of ESG factors, including quantitative climate change data, into the investment decisions across investment teams. This includes data relating to public and private issuers, real estate related securities and alternatives.
- Continued to assess and started to deploy tools that enable Climate Stress Testing and Climate Warming Scenario Modeling across key portfolios.
- Advanced our ESG Investment Governance to ensure we have structure and leadership to drive continued progress across all ESG issues including climate change. Refer to Graph 1 below.
- Re-established the ESG Investment Steering Group which is comprised of senior leadership from Investments. This group’s purpose is to set our vision for ESG investment activities and lead execution across all investment teams and support functions in a consistent matter.
- Revisited the composition of the ESG Investment Working Group to ensure representation across all asset classes. This group, comprised of leaders across all our investment teams, drives change and progress.
- Established an ESG Business Working Group, comprised of all business and functional support areas, to ensure we have buy-in and support from all areas of our business. This includes functions such as Risk, Compliance, Legal, IT, HR, Product Development, marketing and sales. This group ensures all support functions are aligned to our ESG Investment ambitions and that we have leaders across all areas to lead and drive change.
Our approach and structure to sustainable investing will likely evolve as the expected separation of the Life & Retirement business from AIG.