The investment landscape is changing fast in a post-covid world and environmental, social, and corporate governance (ESG) is fast becoming a key element in investment decisions, says Ritu Arora, chief executive officer and chief information officer, Asia, Allianz Investment Management Singapore Pte. Ltd, and India advisor to the Allianz SE Board, in an interaction with Mint. She also talks about the company’s plans for allocating capital to India. Edited excerpts:
What has been the story of Allianz Investment in India so far in terms of capital deployed, large deals, and commitment? Do you plan to increase allocation in the coming months?
For Allianz, India has always been a key focus. We have long-standing strategic relationships and partnerships. Allianz has been serving the Indian insurance market since 2002 through two very successful joint ventures, Bajaj Allianz Life Insurance Ltd and Bajaj Allianz General Insurance Ltd. We have also established a reinsurance business, Allianz Global Corporate and Specialty. We have also been steadily expanding our portfolio investments in India with a commitment to be a partner in India’s growth and development. We have made significant investments in road assets via our investment in the L&T IDPL private InvIT and in commercial real estate through investments via our various joint ventures. Allianz has also increased participation in the private debt space in India to support small, medium, and large enterprises with crucial long-term, bespoke and flexible credit, especially in the context of the constraints faced by banks and non-banking financial companies. After the introduction of the Insolvency and Bankruptcy Code, Allianz has been actively involved in the Indian credit market across the spectrum of distressed, performing, and special situation opportunities. We believe India’s structural growth story has immense promise and Allianz will continue to partner in India’s journey to a $5-trillion economy by investing in critical areas such as infrastructure, private debt, real estate and ESG.
How has covid shaped your investment strategy?
From an investment perspective, India has traditionally been a market where valuations have always been challenging. The pandemic has led to some very interesting investment opportunities as valuations have corrected. We have been evaluating various opportunities and, in some cases, have been moving ahead by closing those investment opportunities in India.
Which sectors are attractive in the near- and long-term?
As a long-term investor, we find sectors focused on India’s domestic growth story, such as automobiles, consumer, and banking, financial services and insurance attractive especially depending on unique selection opportunities embedded in each of these investments. Because of its favourable demographics, long-term growth trajectory, high quality corporates and strong institutions, India is uniquely positioned as one of the most attractive investment destinations in Asia and the emerging markets universe.
Allianz is one of the largest insurance firms globally. Drawing from your experience what will be the key growth drivers for the insurance sector in India?
The Indian insurance industry clocked double-digit growth in 2019, making it a potential heavyweight among emerging markets in the insurance industry. It has tremendous promise because of its growing middle class and its favourable demographic dividend. However, the transformation from a promise to a success story will need the right set of government reforms. To spur growth it will need to build infrastructure, create jobs, invest in enabling technology innovation, and expand into newer markets and under-served areas. The insurance sector needs large and stable capital flows. Enabling increased global investments by relaxing foreign direct investment norms will help bridge this need in the medium- to long-term. Reduced taxation and increased incentives for policyholders will also help greatly. It would also be crucial to create a stable regulatory environment, which is directly correlated to the global investors’ confidence and commitment to the Indian economy.
As an investment philosophy, ESG is fast gaining traction in India. How are you integrating ESG into your investments in India? How are you seeing its adoption in India?
ESG forms an important component of Allianz’s DNA. For us, as insurer and investor, protecting the environment is part of our core business and ESG integration is an active choice as a business and investment opportunity. We use our ESG knowledge and insights to make better investment decisions by factoring in the ESG risks and opportunities that may not be fully priced in by the markets. Globally and in India, we are now increasingly applying a three-dimensional approach—risk, return, impact—to investing. We have liabilities towards our policyholders and, hence, aim to maximize risk-adjusted returns from investments, while maximizing their sustainability impact. It is heartening to see the adoption of ESG investing in India in recent years. ESG funds saw record inflows in the first quarter of 2020, demonstrating the willingness of sustainability investors to persist and stay focused on the long-term horizon. As more and more governments and corporates embrace ESG, we are hopeful that these trends will accelerate.