Posted on 20 Oct 2009
Munich Re today invests a large proportion of its funds on the basis of sustainability criteria (socially responsible investments). Some €100m has already been invested in renewable energies alone (of a total asset volume of around €65bn for the reinsurance group), and our commitment in this sector is set to increase in the future.
The idea behind this is quite simple and the relevance to our core business obvious. Insurance companies are subject to strict security and return requirements, as they have to ensure that their policyholders’ money is invested both profitably and safely. At the same time, they are also affected by growing losses from climate-change-related extreme weather events. Each Euro spent today on CO2 prevention will be repaid in savings many times over in the medium term as claims costs are avoided.
For this reason, we are not just looking for insurance solutions that help to avoid emissions. We actively consider sustainability aspects as an integral component of our corporate policy and invest accordingly in such projects. Today’s investors can profit from a medium-term rise in energy prices and from favorable legal parameters. A return of between 5% and 8%, as is currently possible with photovoltaic projects in Germany and Italy, would be difficult to achieve elsewhere in the present market environment. Another advantage is that such investments are far less susceptible to price fluctuations and can be used towards achieving carbon neutrality.
Activities so far
The starting point for our investment activities in renewable energies is the welivit new energy GmbH, a subsidiary of KarstadtQuelle Versicherungen. Founded in 2005, welivit is part of the Munich Re Group and specializes in developing and implementing projects in the renewable energies segment, with current focus on solar projects in Germany and initial projects in Italy and Spain. It serves as a platform for pooling such direct investments. As at the end of 2008, the installed capacity of the solar projects run and managed by welivit new energy came to some 18 MWp.
Welivit also manages Munich Re’s investments in photovoltaics, with a current volume of €65m. Examples of such projects include our investment in a 1 MW photovoltaic noise barrier on the motorway near Töging and in a total of 7.4 MW on rooftop installations in southern Germany. The photovoltaic plant in Gioia del Colle became the first in Italy to be connected to the power grid at the end of May 2009. A similar project in Spain is also being considered.
What will the future bring?
Munich Re and MEAG are currently conducting a project called RENT (Renewable Energies and New Technologies) to analyze the potential of strategic investments in renewable energies and new technologies, for example in the field of enhancing efficiency and storing energy. Investment in these segments requires our extensive reinsurance know-how in terms of technology and locations. It is quite clear that such projects are of great interest from a risk-return point of view and if further analyzes prove positive, a higher level of investment will be considered, for example in wind farms or solar projects. Other attractive projects in the field of renewable energies and new technologies to materialize, such as geothermal energy, biogas or technologies that enhance efficiency, would also come into consideration.
We are not just looking for attractive returns with these projects, but are seeking to leverage the synergies that exist between such investment and our core business. We firmly believe that our insurance and technical know-how from our core business will help us to make better investment choices. At the same time, we can also learn a lot from working together with other partners on these projects, which we can then put to good use in developing new insurance products. As investment in renewable energies is frequently a highly capital-intensive affair, appropriate insurance solutions need to be found before any financing can be given the go ahead. This gives us the opportunity to offer our clients a wide range of products along the whole value chain, to provide them with an excellent all-round service and to enhance customer loyalty.
Sustainable investments – environmentally sound and profitable
Sustainability is becoming an increasingly important aspect of investment, and eco-investments offer above-average growth opportunities. As climate change involves such a wide range of risks across the whole spectrum of the economy, it is likely to remain a major factor for investors in the years and decades to come. Evaluating investments according to "green criteria" is much more than just a passing fad.