Swiss Re is switching the entire $130 billion it holds in liquid assets to track ethical indices, the latest move towards principled investments by the insurance industry. The world's second-largest reinsurer ... said taking social and governance (ESG) criteria into account reduced the risk of losses especially for long term investors. This is not only about doing good, we have done it because it makes economic sense," Swiss Re Chief Investment Officer Guido Fuerer told Reuters. Institutional investors are increasingly looking at how companies perform on environmental, social and governance-related issues, given the potential for poor behaviour to lead to a share price hit. A Bank of America Merrill Lynch Equity and Quant Strategy team last month said ESG-based investing reduced bankruptcy risks for U.S. stocks, while companies with the widest credit default swap spreads are the ones with the weakest ESG credentials, according to research by Hermes Investment Management. "The ultimate point is to put incentives to companies to become more sustainable," said Swiss Re's Fuerer. He said Swiss Re is the first insurer to base its whole portfolio on ethical principles, with portfolio managers being told to use MSCI's environmental, governance and social indices when making investment decisions. MSCI rates companies according to various ethical criteria, with the score combined with market capitalisation weight to create an index. Companies with a more ethical performance have a greater weight in the index.