Understanding Responsible Investment #15 - Focus on Life Insurance

Dorothée Chapuis: Hello everyone and welcome to the fifteenth and final episode of our "Understanding Responsible Investment" series. I am Dorothée Chapuis, Head of CSR for Societe Generale Private Banking Europe. To address the last - and not least - topic of our series I am very pleased to welcome Mickael Roussel, Head of Life Insurance Offerings at Societe Generale Private Banking. In this episode, we'll look at how sustainable investment applies to life insurance policies.

Dorothée Chapuis: Hello Mickael!

Mickael Roussel: Hello Dorothée!

Dorothée Chapuis: Mickael, you are in charge of developing the distribution of life insurance policies and capitalization policies in partnership with private bank insurers. We usually say that life insurance is the preferred investment of the French. At Societe Generale Private Banking, we estimate that 61% of our clients' assets are held through capitalisation contracts or life insurance policies. Can you tell us quickly why, please?

Mickael Roussel: Yes, Dorothée, there are two reasons for this. Firstly, during the last fifteen years, when interest rates fell sharply and stabilised at very low levels, life insurance policies allowed you to invest your savings in the euro fund without taking too much risk in terms of capital, with a return net of inflation that was higher than that of a bank passbook. I must say that this is no longer entirely valid today. On the other hand, the life insurance contract offers a tax framework that can be interesting in the event of inheritance or in the event of redemption after eight years. The French generally have a strong appetite for tax-advantaged products.

Dorothée Chapuis: Thank you, Michael. We are not going to go into the details of the tax framework for life insurance right now; for more information on this subject, listeners can ask their usual banking contact. Let's move on to our main topic: how are life insurance policies affected by responsible investment?

Mickael Roussel: First of all, Dorothée, I would remind you that life insurance policies are envelopes that schematically include two major categories of support. On the one hand, you have the support in euros, the support without risk remunerated by the insurer of which I have just spoken before, and on the other hand, you have all the supports in units of account representative of shares of UCITS (Undertaking for Collective Investments in Transferable Securities), invested on all the classes of assets: the actions, the bonds, the monetary securities and when your contract allows it, representative also of securities in direct, like for example, structured products, or when the contract has a management or advisory mandate. The approach to responsible investment differs according to these categories.

Dorothée Chapuis: So, Michael, let's start with the euro fund. Does it incorporate any of the SRI characteristics, that we described in episode 4 and episode 5 of this podcast series?

Mickael Roussel: Yes, more and more insurance companies are integrating ESG (Environmental, Social and Governance) criteria into the management of their euro funds. For example, all our partner companies apply exclusions linked to controversial sectors from a social point of view, such as tobacco or controversial weapons, or from an environmental point of view, such as thermal coal. In addition, these companies select the securities in which they invest by taking into account both financial and extra-financial considerations related to the issuer's ESG rating, its greenhouse gas emissions, etc. Furthermore, insurers are increasingly implementing voting and commitment policies and are subject to sustainable finance regulations. However, the euro fund is not a medium that can claim an SRI label at this stage.

Dorothée Chapuis: Very good. And what about unit-linked products?

Mickael Roussel: For this category of media, things are evolving favourably, in particular following the PACTE law in France, which requires, since January 1st 2020, that all companies in this category have to be registered in a register. In January 2020, it will be possible to offer unit-linked products through SRI- or Greenfin-labelled funds or funds that invest in socially responsible companies. This development is a potential source of additional growth for responsible investment. All the companies we work with have not waited for the January 1st 2020. I would also like to remind you that investment in a particular unit-linked fund is the result of the investor's decision. I would also like to remind you that investment in a particular unit-linked fund is the investor's decision and it is the investor who will ultimately be able to make the choice in favour of responsible investment - taking into account, of course, his or her objectives in terms of risk, return and investment horizon.

Dorothée Chapuis: Mickael, this is very clear and we can see that it is possible to combine life insurance savings with sustainable development considerations. Thank you for this insight.

Mickael Roussel: You're welcome Dorothée, thank you !

This podcast is part of a series of episodes proposed by Societe Generale Private Banking to understand responsible investment. It is available on the Spotify and Apple Podcasts streaming platforms via the "#Private Talk by Societe Generale Private Banking" program and on our website www.privatebanking.societegenerale.com. Feel free to subscribe to be notified when the next episode is released and to spread the word

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