The banking crisis in Switzerland, which prominently saw the emergency takeover of Credit Suisse by UBS, should prompt a review of the current asset managers and custodians of Swiss pension funds, said Alexandra Tischendorf, head of investment at WTW Switzerland.
“Pension fund boards should review their current asset managers and custodians under the advice of their independent investment consultant and make any changes deemed necessary,” Tischendorf said commenting on WTW’s Q1 Swiss Pension Finance Watch for corporate pension funds.
Adam Casey, head of corporate retirement consulting at WTW in Zurich, advised companies to continue to look closely at pension assets on balance sheets given market volatility resulting from the turmoil hitting banks particularly in the US and Switzerland but that could spread potentially to the wider banking sector.
He added: “As we have seen in the past, there is no guarantee that assets and liabilities will move in the same direction, especially during turbulent times. In addition, another challenge lies ahead in the future with the potential to further increase company pension liabilities, because for the first time in more than 20 years pension funds across the whole market may need to consider increases to pensions in payment, due to the return of inflation.”
Liabilities for corporate pension funds increased by 2.3% in Q1 as discount rates fell, while invested assets returned 2.8%, outweighing the increase in liabilities, according to WTW.
The funding ratio of corporate pension funds stood at 128.8%, up from 128.2% on 31 December 2022, it added.
DWS starts exit from coal
German asset manager DWS has announced a new policy to stop investment and divest from thermal coal companies.
The policy applies to listed and unlisted equity and debt instruments issued by coal companies with the exception of use-of-proceed bonds, including green bonds, issued by coal companies; direct investments into coal-related businesses or assets, and derivatives, it added in a document outlining the guidelines.
Investments in real estate assets involved in the extraction, storage, transport, or manufacture of coal are prohibited, the policy added.
DWS will not invest in companies generating a share of revenues greater than 25% of the total from coal business, divesting from existing holdings in such companies.
The asset manager will stop investments in all companies with a an exposure to coal equalling to more than 5% of the share of revenues by 2040, and divest from existing holdings in such companies by the same date. It will exit holdings in companies with coal activities in the EU/OECD area by 2030.
DWS will engage with companies generating more than 5% of revenues from coal to accelerate the phase-out, it added.
German pension funds invest in UN agriculture fund programme
Four German pension funds have invested €65m in a programme to eradicate poverty and support small farmers in developing countries run by the United Nations’ agency and financing institution International Fund for Agricultural Development (IFAD).
Hamburger Pensionskasse, the German pension fund with €10bn in assets under management as of 2021, was the anchor investor in the first euro-denominated bonds issuance financing the programme.
The maturity of the private placement with the pension funds is 12 years. IFAD issued its first two sustainable bonds for a total amount of $150m last year.
The proceeds from the issuance will finance projects in rural areas hit by poverty and hunger to fulfill the promises of Sustainable Development Goals, in line with the IFAD’s sustainable development finance framework.
IFAD’s Sustainable Development Finance Framework (SDFF) applies to bilateral loans and private placement to finance project in the 177 countries member of the agency.
According to an investors’ presentation, IFAD allocates capital to poor regions not reached by development projects financed by large institutions.
The investment from the latest bond issuance will support small farmers in rural areas in developing countries facing the consequences of climate change, their production and access to value chains and markets.