When evaluating our investment portfolio, we are mindful of climate change risks.
We purposefully evaluate and manage exposure to certain catastrophe risks in our commercial real estate portfolio, like those that may be impacted by climate change. When considering new investments in physical assets, including commercial real estate, we evaluate whether the risk profile is consistent with our risk appetite as determined by senior leadership.
Environmental, social and corporate governance issues can influence investment performance.
Allstate Investments’ compliance department maintains a restricted list that defines prohibited types of investments, which are typically entities whose activities are fundamentally inconsistent with Allstate’s values or are likely to result in reputational or other significant risks. These restrictions include investments in companies that predominantly conduct business in the civilian firearms industry, or majority ownership interest or control of a company that operates a coal or other mine (either directly or through a subsidiary) or provides services to those mines. Our Investment Management Guidelines state that investment managers’ analysis and decision-making consider environmental, social and governance issues alongside Allstate’s values and reputation. Investment managers are expected to act in accordance with the letter and the spirit of the guidelines. If an entity is not listed on the restricted list but the portfolio manager or asset manager believes it could potentially be considered for inclusion, the portfolio manager or asset manager must obtain approval from the Risk Committee and Investment Compliance before entering into the transaction.
Allstate’s investment portfolio focuses on generating competitive returns while keeping risks at appropriate levels. The company is proud to weave corporate responsibility into its overall approach.
Our portfolio includes support of environmentally friendly and socially responsible investments with attractive risk/reward trade-offs. In 2018, our investments included a socially responsible investment portfolio of $64 million and a renewable energy portfolio of $325 million. Included in the renewable portfolio are debt and equity investments in wind, hydro and solar power, as well as geothermal projects. Additionally, we have a low-income-housing tax credit portfolio of $725 million. Allstate’s low-income-housing tax credit portfolio supports low- to moderate-income families by providing access to nearly 70,000 affordable rental housing units.
Almost half of our $9.2 billion municipal bond portfolio has a socially responsible focus. Municipal bonds are issued by states, cities, counties and other government entities to fund construction projects such as schools, highways or sewer systems. Municipal bonds help balance risk and provide good long-term returns and strong after-tax benefits for Allstate, but they also support projects that benefit communities.
Research shows that while diverse investing teams consistently outperform less diverse ones, women and minorities are still underrepresented in the private equity and real estate private equity investment sectors. To ensure our investment team demonstrates superior performance while addressing underrepresentation, Allstate created the Diversity Emerging Managers program.
The goal of the program is to identify the next generation of women and minority investment managers, with comparable, top-quartile risk-adjusted return expectations. We collaborate with GCM Grosvenor to select firms that are at least 33% owned or controlled by women and/or minorities and at least 50% of the firm’s profit is paid to women and/or minority staff. Allstate committed $96.5 million of the $100 million allocated to the program toward participating firms. We carefully assess the returns on the funds we commit for investment.
In addition to our financial commitment, the participating firms also receive development training from GCM Grosvenor that covers a wide range of topics such as asset firm management, finance and marketing.