Most consumers know us as one of America’s largest insurers, but we’re a lot more than that. Another way we provide security and protection for customers is through our activities as an institutional investor. We manage a $64.7 billion investment portfolio, and we know that environmental, social and governance issues can influence investment performance. Allstate’s investment analysis and decision-making processes consider these issues along with our values.
Allstate’s Responsible Investment Committee (RIC) includes representatives from a cross-functional group drawn from Allstate Investments, with the chairperson of the RIC also a member of Allstate’s ESG Steering Committee. The RIC monitors ESG investing trends, evaluates ESG investing best practices, supports the work of the ESG Steering Committee and periodically reports about its activities to other senior leaders within Allstate as well as to the Allstate Board of Directors. In conjunction with Allstate’s Investments Risk Committee, the RIC monitors our investment portfolio for potential exposures to climate change risks or impacts. You can find more information about these risks in the Climate Strategy and Disaster Resiliency section.
- We classify sectors based on exposure to environmental risks, including climate change, and incorporate environmental risks in the sizing and maturity profile of our positions. Sectors with higher potential exposure are primarily invested in through public markets, providing flexibility to adjust exposures.
- We classify commercial real estate investments based on their modeled exposure to catastrophe risks and incorporate these risks in our underwriting and insurance practices.
- We continue to evolve our risk management processes regarding climate risk.
Policies and practices
In June 2020, Allstate’s Investment Management Committee adopted our Responsible Investing Policy. It outlines our expectations for investment professionals to incorporate and consider ESG factors, subject to client investment policy requirements, when making investment decisions and requesting our external money managers to do the same. The policy applies across all asset classes in our investment portfolio. In 2021, we made minor changes to the Responsible Investing Policy as part of our annual review process.
We expect our investment professionals to refrain from making certain types of investments that may result in significant ESG-related risks and consult with the RIC, as needed, on any related asset selection decisions. In addition to the Responsible Investing Policy, our Investment Management Guidelines state that investment managers’ analysis and decision-making should consider ESG issues alongside Allstate’s values and reputation when assessing the risk/return trade-off of an investment. Investment managers are expected to act in accordance with the letter and the spirit of the guidelines, subject to client investment policy requirements.
Our investment professionals participate in annual training on the Responsible Investing Policy and related ESG information. In 2022, training was captured in part by an Allstate Climate Summit with industry-diverse speakers presenting on climate topics such as climate risks and modeling, climate opportunities, regenerative agriculture, carbon pricing and more. We incorporate tools for ESG and climate-related data into our processes, and train the Investments team on their use. In 2021, we began using ESG data feeds and analysis from expert research firms to assess our assets, exposures and ESG risks. Finally, our commitment to evaluate the Scope 3 emissions in our investment portfolio put us on a path to pursue science-aligned targets. You can read more about our plans to adopt science-aligned targets in the Climate Strategy and Disaster Resiliency section of this report.
We prohibit investing in certain 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.
For underwriting activities, Allstate underwrites personal lines insurance and small commercial business, and there have been no lines of business exited or contracts not renewed for reasons related to ESG. As displayed in the Accountability section above, Allstate is committed to acting on opportunities as they arise.
Programs and performance
Allstate incorporates ESG considerations broadly across the entire portfolio. As of Dec. 31, 2021, we managed a $64.7 billion investment portfolio, with $7.2 billion in responsible investment categories such as education, sustainable and affordable housing, health care, green bonds, diverse sponsors, and renewable investments. Most notably in 2021, we allocated $408 million to low-income housing tax credits, and over $240 million to climate-related investments, with an enhanced investment of capital across the energy transition theme. We also increased our trading with minority, women and veteran banking enterprises (MWVBEs) more than tenfold compared with historical volume during 2021, representing 3.6% of total trading volume.
To ensure our commitment to responsible investing is sustained, we have established a dedicated impact portfolio aligned with two key pillars of Inclusive Diversity & Equity and climate change while generating attractive risk-adjusted returns. We have also set exclusions/standards across our overall portfolio, subject to client investment policies.
In 2022, we will continue to increase the percentage of the portfolio allocated to responsible investments, from 11.1% at year-end 2021. We aim to double trading volumes from 2020 levels with MWVBEs, and we are targeting at least $300 million in low-income housing tax credits and $180 million in new commitments with diverse sponsors and managers in 2022. We plan to expand our climate-related investment capabilities and relationships, targeting at least $375 million in commitments between 2021 and 2022.