The chief investment officer of Ageas has said there are several aspects of a firm’s sustainability practice that cannot be regulated and warned that over-regulation will undermine motivation at work. 

One main challenge of sustainability reporting is the lack of good quality of data. But with several initiatives from the EU, companies are required to provide more data, which in turn will boost transparency. Under the European Green Deal, the region is implementing a package of policies and measures designed to fight climate change, support sustainable innovation and make Europe the first climate-neutral continent by 2050.

Wim Vermeir applauded the idea of having more reliable, comparable data, thus bringing more coherence to sustainability ratings. However, he said: “You cannot regulate everything.”

In an interview with Insurance Europe on Thursday, Vermeir argued investment decisions depend on different aspects of sustainability, which cannot be regulated.

He said: “Sustainability analysis is about different dimensions. It’s about the environment, resources, ethics, society, suppliers and governance. These are very different dimensions. The final result of whether this investment is sustainable or not depends on how you weight it. That's a little bit subjective. I think that part will never be regulated.”

Vermeir also stressed the need for companies to have sufficient time to get used to new regulations: “It is more important [that] after this tsunami of regulations we have from Europe to stop a little bit. Let they sink it in… so that we can work with them… because otherwise it will be over-regulating. That would be very negative.”

He went on to say over-regulation would impact those working on sustainability: “I have to admit it's not the most motivating work. So let's stop a little bit with regulations for the next couple of years. We have enough with that.”

Two notable rules within the EU are the Sustainable Finance Disclosure Regulation, which imposes mandatory environmental, social and governance disclosure for asset managers and other financial markets participants; and the Corporate Sustainability Reporting Directive, which requires large and listed companies to publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment. 

According to its 2022 sustainability report, the Belgian insurer already excludes controversial items in its investments including coal, tobacco, weapons, Artic drilling, shale oil and gas, oil sands and gambling. Ageas has signed up to several initiatives such as the United Nations Principles for Responsible Investment, Carbon Disclosure Project and the Net Zero Asset Owner Alliance. In 2022, the company went further to exclude all investments in companies in serious breach of the United Nations Global Compact principles.

By 2024, ESG considerations will be 100% integrated into its investment decisions.

But the insurer does not stop here. Vermeir also expressed strong support for assets that have a positive contribution to the transition towards a more sustainable economy. 

“I'm thinking about renewables, public transport, social housing, hospitals and schools.”

He said the composite insurer was directing €10bn (£8.5bn) by the end of 2023 towards such investments but it had exceeded its target to €13bn: “I'm happy about that. A little bit more than half of it are green investments and a little bit less than half of it are social investment. So we have a good mix.”

Ageas is committed to making its investment portfolio net zero by 2050 but Vermeir acknowledged 2050 “is still a long way”; therefore, the company has set an intermediate target to reduce the greenhouse gas emissions of its equity, corporate bond, real estate and infrastructure portfolios by 50% by 2030.

Ageas’ investment decisions are not without difficulties. With nearly €70bn assets under management, the insurer has to continue to invest in industries “that are not completely green and not completely brown”, said Vermeir.

“The most polluting industry in terms of carbon footprints… is the electricity sector. There will be no Tesla without the electricity sector.”

But he said Ageas actively initiates dialogues with companies to support them in their sustainability journey. 

“We want to continue to invest in this sector. We continue to invest in these companies, but we talk to them. We encourage them, we force them to make them greener and greener.”

Vermeir concluded: “Sustainability is not about perfection. Sustainability is about making progress. We are not perfect, but I'm sure that we have made a lot of progress during the last few years.”