Thematic Investing: fostering a healthier, resilient society and a greener, more digitized economy

At Swiss Re, we're passionate about making the world more resilient. It's a world that undergoes dramatic changes and thus requires a forward-looking mindset, flexibility to adjust and ability to spot new trends early on.

Based on premium income, re/insurers naturally benefit from a stable funding source.

As an asset owner, Swiss Re invests its own balance sheet. This puts us in a good place to commit capital into structural trends and to benefit from shifting value pools in the economy. At the same time, we're well-positioned to systematically support structural industry transformation and productivity gains with a long-term and responsible investment approach.

At Swiss Re, we achieve this through a thematic "lens" embedded in our investment process, thus complementing the traditional asset class view. Swiss Re looks to capture emerging structural change not yet fully recognized by financial markets and effectively allocate long-term capital to disruptive innovation. Our aim is to meaningfully enhance risk-adjusted portfolio returns over time and complement opportunities that Swiss Re pursues on the risk underwriting side. 

As we embark on the thematic investing journey, we would like to adjust our approach as needed, learn along the way, and be disciplined in gradually investing capital over time. Our ability to tap into Swiss Re's deep expertise to develop our thematic thinking is a unique asset. It enables leveraging insights from our underwriting activities, our experts on the risk management and operations side, or from our research powerhouse and its network - the Swiss Re Institute. 

We've identified three key themes underpinned by strong secular tailwinds:

• healthcare
• digital infrastructure
• energy transition

We strongly believe that providing long-term capital to these areas can contribute to a more resilient world.

First, in the healthcare space, we build on Swiss Re's global leadership position as a life and health reinsurer. In this traditional risk services and risk transfer role, the Group supports its clients to meet challenges and opportunities related to the life and health insurance landscape. On the investment side, we complement this proposition by supporting medical innovation and improved patient outcomes. We also invest into solutions that make healthcare systems more efficient.

Our focus is both on private and public market opportunities, with initial investments made in areas such as outsourced pharmaceutical development or the accelerated innovation around gene and cell therapies. We are also highly interested in health data software and analytics. As a global reinsurer and knowledge company, Swiss Re is well positioned to appreciate the value of data in healthcare and research and has entered into high-quality partnerships to accelerate our insights in that regard.

Health data in today's world must be available in digital format. That's a key requirement to enable continued clinical discoveries and support an increased quality and efficiency of healthcare services. The continued digitization of the healthcare system will have to go hand-in-hand with an appropriate regulatory framework and resilient infrastructure. This leads to our second thematic investment area: digital infrastructure.

The world has gone through two years of a pandemic. Lessons can be learnt, including how the digitization and virtualization of the economy has helped cope with the pandemic challenge. At Swiss Re we're convinced that digital infrastructures can help enhance overall resilience and support economic growth. As an experienced investor in high-quality infrastructure, Swiss Re thereby helps building the backbone of data storage, traffic and usage. For example, investments into optical glass-fiber networks are a good 'down-to-earth' measure of such infrastructure development. Swiss Re is an active investor in this important field as well.

There is another key angle to digital infrastructure: enabling creation, access to and growth of financial services markets. In countries with low insurance penetration, digital infrastructures can facilitate distribution of and access to digital insurance offerings. This highlights an important aspect: digital insurance products can be produced very efficiently, making them more broadly affordable. This enables inclusive growth by facilitating access to insurance and financial services. Digital infrastructure and digital insurance can thus help reduce inequalities and make societies more resilient.

The third focal area of Swiss Re's thematic investment aligns well with our overarching 'Responsible Investing' approach: financing the energy transition. It's underpinned by the shift to clean energy, electrification, electricity storage and the hydrogen economy. Recent geopolitical developments further increased the urgency to develop a more reliable, decentralised and greener energy system.

Humanity's ambition to achieve net-zero greenhouse gas emissions by mid-century is estimated to result in incremental funding needs of USD 3-4 trillion p.a. We also see that, post-COVID19, the global focus on net zero is stronger than ever with unprecedented global policy momentum.

Clearly, long-term institutional investors like Swiss Re are well placed to put their capital at work here, leading the way and also encouraging other investors to consider joining the transformation effort. Even though we are still in an exploratory phase on how to access this potentially very large investment opportunity across asset classes in the coming years, a few concrete actions have been taken already.

Climeworks is one example - the Swiss company and now leading specialist in carbon dioxide direct air capture technology (DAC). After the world's very first long-term DAC purchase agreement Swiss Re announced in August 2021, we recently decided to also invest directly into Climeworks as part of their latest financing round in early April 2022. This partnership underlines our determination to support development of high-quality carbon-removal technologies and encourage other market participants to consider similar steps.

While we continue to lend to high-quality and large-scale solar parks and wind farms, Swiss Re is also exploring opportunities to support the scaling of more decentralised renewable energy systems at residential and commercial scale. Again, we see clear resilience benefits in decentralised energy production in combination with smart enabling technologies. Energy storage will play a key role in this transformation. Consequently, Swiss Re also looks into battery and longer-term storage options such as green hydrogen.

Swiss Re's vision under the thematic investment approach outlined above is to take well-informed portfolio action to invest into future industry disruptions, supported by a strong thematic investment process and access to expertise.

In the coming years, we plan to further grow Swiss Re's thematic investments in incremental steps and in a well-diversified manner, while rigorously applying our ESG principles and being mindful of risk-return and possible market exuberance considerations. Ultimately, our focus remains on the delivery of sustainable and attractive risk-adjusted performance, a key objective to support the Swiss Re Group in making the world more resilient.