Just group PLC | Annual Report and accounts 2022
SUSTAINABLE INVESTMENT STRATEGY
INVESTING THE JUST WAY
Just has a compelling purpose: we help people achieve a better later life, and this purpose shapes our approach to how we invest.
yellow, green (“PRAYG”), which assesses ESG risks associated with individual investments. This ensures ESG factors, which also impact other risks such as credit and market risks, are fully considered. We have set out our commitment to stewardship activities and are actively involved in a number of initiatives. GREEN AND SOCIAL INVESTMENTS The Sustainability Bond Framework (“Framework”), developed in 2020, was enhanced in 2021 in line with the International Capital Markets Association Green, Social and Sustainability Bond Guidelines. The Framework has received a second party opinion from Sustainalytics, recognising our environmental and social credentials. Furthermore, a Green/Sustainability Bond Forum has been established to approve asset allocations for any bonds issued by Just Group using this Framework. In September 2021, Just Group became the first UK and European insurer to issue a Sustainability Restricted Tier 1 bond. The Group has made a commitment to invest the gross issuance proceeds of £325m in eligible green and social assets. When combined with the 2020 Green Tier 2 bond commitment, the Group has committed to allocating a minimum of £575m towards these eligible assets before September 2024. By the end of 2022, we had completed the full £575m green/social asset investment commitment spread across 23 green and social assets including wind and solar investments in UK, USA, Germany, Spain and Chile, in addition to UK social housing projects and green buildings . More information on this can be found at justgroupplc.co.uk/investors/esg . OUR PROGRESS OVER THE LAST 12 MONTHS Over the last 12 months, we joined a variety of initiatives aligned with our corporate sustainability strategy focusing on climate change and diversity, equity and inclusion (“DEI”). We have been working towards enhancing our approach set out in the RIF, whilst continuing to originate new assets within the investment portfolio in order to meet our new business needs. Additionally, we have supplemented our existing ESG data provider, MSCI, with S&P to further enhance our analysis of ESG considerations and climate change across the investment portfolio. Beyond this, we have continued to grow our panel of specialist asset managers by selecting three new managers in 2022. Even though we have completed our bond commitments, we expect to continue increasing the Group’s exposure to green and social investments in line with our overarching frameworks to deliver positive outcomes.
INVESTMENT MODEL Our overall investment approach is driven by our ability to cashflow match our liabilities with a mix of investment grade liquid and illiquid fixed income assets through an enhanced “buy and maintain” strategy. Our long-term retirement income promises, which provide peace of mind and certainty to our customers, are backed by long-term income producing assets, the majority of which are managed in-house. On the illiquid side, these are split between the lifetime mortgages that we originate and manage ourselves and other illiquid assets, which includes a diverse range of investments such as infrastructure debt, private placements, commercial real estate mortgages, ground rents and income strips. We have built a panel of 15 specialist external asset managers, each carefully selected based on their particular areas of expertise. The opportunities originated by the managers are then assessed by our in-house investment team who select the most suitable investments to pass through our internal screening process. Currently, the other illiquid assets account for £3.3bn or 16% of our £20.3bn investment portfolio (excluding derivatives and collateral), but this is expected to increase over time, as the proportion backing the new business is higher than the in-force portfolio. In 2022, we originated over £1bn of other illiquid assets in addition to over £0.5bn of lifetime mortgage to support new business pricing and optimise back book returns RESPONSIBLE INVESTMENT FRAMEWORK Just developed a Responsible Investment Framework (“RIF”) in 2019, defining how we integrate environmental, social and governance (“ESG”) factors into the analysis and decision making processes. Since its implementation, investment opportunities have been assessed to ensure they meet our pre-defined criteria. The RIF covers a range of sustainability issues, including climate change. Within the framework, we adopt a principles-based approach seeking to achieve four overarching objectives. These are to analyse and identify risks and opportunities arising from Responsible Investment (“RI”) factors; engage in frequent dialogue with external managers and providers; actively identify and monitor our portfolio for investments not aligning with our RIF and take action; and transparently disclose RI characteristics of our portfolio to stakeholders. We also have a scoring system called purple, red, amber,
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