Ageas’ investment chief: ‘Brown companies have no future’
Wim Vermeir, the CIO at insurance company Ageas, explains to Net Zero Investor how to go the distance in the complex transition to net zero
Vermeir’s name in Belgium’s insurance space, and everyone knows who the long-standing chief investment officer of industry giant Ageas is.
Vermeir has been CIO of Belgium’s largest insurer for more than 12 years, serving around 50 million customers in 14 countries worldwide via an investment portfolio of €70bn.
Vermeir has had an interesting journey. The first fund he ever managed, by himself, was a sustainable investment vehicle.
“At that time, we called it an ethical fund. It was in April 1996, so it was pretty new,” he told Net Zero Investor in an exclusive interview.
“Most of my colleagues didn’t really believe in it,” Vermeir said, who is also CIO of Ageas' well-known subsidiary AG Insurance.
“They thought ethical criteria were about child labour or not investing in weapons … that it was already difficult to invest, so if you added on top of it all these criteria, it would only cost money.”
Vermeir was, however, a bit more neutral on the question. “Long story short, it became a successful business and that fund became a fully-fledged activity: it was socially responsible investing.”
The long view
As part of his current role, Vermeir ensures that environmental, social and governance (ESG) standards are integrated into all the group’s investment decisions.
“There is no piece of research, no investment decision … that are coming on my desk without the ESG part having been treated,” he explained. “Maybe it’s not perfect, but at least the risks have been flagged.”
In his view, ESG is not only about looking at the financials, but at what can go wrong with a potential investee company.
“If you talk about ESG, you talk about long-term investing, about a little more ‘defensive investing’,” Vermeir stressed, pointing that for an insurance company or a pension fund, it helps determine additional risks and long-term growth opportunities.
“You have to look at the interactions the company has with the environment and with stakeholders in general,” he continued, adding that Ageas’ ESG framework is about excluding, integrating, engaging, and promoting.
And that’s where responsible and sustainable investing comes into play.
According to the company’s investment head, sustainable investing is about thinking long-term, while responsible investing means being a good steward for the money that goes to pensioners by taking into account both risks and returns.
are some assets, some companies that are not sustainable or responsible … I’m
thinking about gambling, I’m thinking about tobacco, I’m thinking about coal.
It can be an interesting investment if you are a short-term investor … but the
negative impact on society on top of long-term profitability and credit risk of
these industries lead us to exclude them.”
For certain investments, one of the ESG criteria might have more impact than others. Vermeir acknowledges that, on the measurement and data front, there is more advancement on the environmental side.
Hopefully, he noted, there are more and more standards that allow a better harmonisation of collectable data to integrate ESG.
brown and green, kaki
The investment portfolio that Vermeir manages can be described as a colour palette. The brown part includes companies which, in his view, have no future. As such, Vermeir refuses to bet on them.
The green part, on the other hand, is made up of renewable power sources or green energy solutions.
“There, of course, we go full in,” he explained, adding that Ageas has invested about €1bn in solar and wind over the past five years.
But in his view, the most interesting part is all the industries in between: a combination of brown and green which Vermeir calls “the kaki part.”
“There, our real ambition and added value is to move the kaki more and more into the green,” he said. “I think we need this type of industries in order to make them evolve towards a greener future.”
In Ageas’ portfolio, the most polluting industry might seem “a little counterintuitive,” namely electricity.
have the highest carbon footprint for the time being, because even though they
have some production from renewables, they are still also using oil and gas.
And there I think it would be ironic if we say that we are excluding
electricity because a lot of the green transition is about electrifying the
For the “kaki” companies, the CIO is not planning on waiting until 2050 to see them move in the right direction.
Ageas is making sure that they live up to their own promises, in addition to align with the targets the group has set for itself: the insurance firm plans to halve emissions of its equities, corporate bonds, real estate and infrastructure portfolios held by European consolidated entities by 2030, against 2021 levels, and achieve net zero emissions in its entire investment portfolio by 2050 at the latest.
“If a company is missing a profit target, is it a one off and will they recoup afterwards?” Vermeir noted.
Towards a sustainable behaviour
By 2024, as part of its Impact24 corporate strategy launched two years ago, Ageas intends to have 25% of its insurance premiums come from products “that stimulate the transition to a more sustainable world.”
These products – a combination of renewables, green bonds, climate technologies and solutions and the greenest buildings with external certificates – can also help customers make affordable low-carbon home improvements or encourage less driving.
“If you don’t use your car, you get a discount or in case of damage, we offer the customer the choice to have the car repaired with recycled green parts,” Vermeir said.
“The idea is to offer assurance solutions to customers that include an incentive to change their habits and behaviours to a more sustainable alternative.”
Earlier this year, a survey by AG Insurance showed that nearly half of Belgian people consider important that car repairs are carried out in a sustainable way.
But as global warming and extreme weather events cannot solely be stopped by individual actions in the mobility sector, insurers need to cope with risks stemming from climate change, whose demonstrations are expected to be more frequent and intense.
According to Ageas, insurers can work on the liability side by diversifying their portfolio through reinsurance, and take into account climate risks in their risk models.
The pooling of risks is another solution, as is doing Flood Re, a joint initiative between the British government and insurers that aims to make the flood cover part of household insurance policies more affordable.
“On the asset side, countering the effects of climate change can be done by investing in companies or organisations that contribute to lowering the impact of climate change,” the company writes in an email to Net Zero Investor.
To this end, Vermeir believes that net zero alliances are particularly useful to see how other sector players are handling the low-carbon transition.
“You don’t have to discover everything from zero. You can work with them and be more efficient.”