Swiss retailer makes ESG standards mandatory for external managers
The CHF23.8bn (€20.2bn) pension fund for the Swiss retail giant Migros has started to roll out a new sustainable investment strategy.
The Migros Pensionskasse (MPK) said all external managers would be required to adhere to “minimum environmental, social and governance [ESG] standards”.
“These will be based on Swiss laws and international conventions Switzerland is supporting,” the fund said in its latest annual report.
In addition, MPK said it would engage with its largest shareholdings in foreign companies as an active shareholder.
At the beginning of the year the pension fund’s foreign equity benchmark was switched to MSCI’s ESG index. Since then, the pension fund has overweighted companies with a strong ESG rating from MSCI.
MPK’s equity holdings made up more than 19% of the total portfolio as per year-end 2017.
The new ESG approach was agreed by MPK’s trustee board in November last year. A month later MPK joined SVVK-ASIR, the Swiss association for responsible investment that was founded in 2015 by several pension funds.
“MPK is convinced sustainable investment can improve the risk-return ratio to benefit members without diminishing returns,” the fund said.
In addition, MPK said it would also “include ESG criteria in all investment selections”.
In an unrelated move, the pension fund last year pooled all its real estate investments into a separate vehicle that it created at year-end 2016.
Over the first quarter of 2017 the pension fund transferred CHF5.2bn in domestic real estate assets to an unlisted vehicle especially created for Swiss institutional investors. The vehicle will facilitate management and administration of the real estate portfolio.
Last year, MPK posted a 9% return on its assets, compared to 5.3% the year before. The result was well above the 2017 market average of around 7.5%.