Claus Skadhauge, head of communications at PKA, which manages eight Danish pension funds that have a total AUM of DKK110bn (€14.8bn)

o PKA SRI is no longer just a specific part of the portfolio. If it were, would it allow us to consider the rest of our portfolio less ethically and be forgiven for that?

“Instead, we see SRI as a framework of established ethical guidelines which apply to all investments. The guidelines are an overall reflection of the interests and attitudes of the members, but must also be encompassed within the legislative framework that has been established for the pension funds’ investments. They must also be practical in terms of the daily management of investments. The guidelines observe the principles of the UN’s Global Compact initiative.

“We believe that companies that adapt to markets ‘decently’ will in the long run end up being more profitable than those that do not. We certainly want to create a basis for good pensions but we also want to do it with a clear conscience. For us, there is no contradiction at all in this.

“Members of the pension funds have also emphasised a more active approach to SRI which contrasts with a general but more negative approach of what not to do. Consequently, we looked for investments where ethical considerations go hand-in-hand with economical ones. Investments in, for instance, new energy solutions, organic food production and distribution, recycling, and environmentally sound production systems are all part of the portfolio.

“In late 2005 we also invested in a private-public partnership with the Danish foreign ministry with regards to investments in infrastructure and production systems in a number of developing countries.

“There is no evidence that SRI does not pay off. No doubt the risk is a little higher but so is the expected return. Given that we are among the top performers of the Danish pension market, our approach to SRI does not appear to have limited returns in any way. But we cannot give a specific number as our SRI is not a separate part of our portfolio.

“If we put supreme efforts into SRI projects, they have a better chance of becoming successful. And if they become successful, they will make a positive contribution to the pensions. But in the end the overall objective for investments is to create a basis for good pensions, and it may be that a specific project or investment may not be allowed to run its full course if results are insufficient.

“I have a feeling that the market in general will have to move away from regarding SRI as a well-defined and restricted part of a portfolio and instead implement it in overall investment strategies. SRI is a comprehensive approach not just an affectation.

“Since SRI considerations are implemented in PKA’s overall investment strategy, the daily handling of SRI follows the daily handling of all investments by both PKA and managers around the world who have all pledged to follow our ethical guidelines when investing on our behalf.”


Christian Böhm, CEO at APK Pensionskasse, which has AUM of (€2bn

e differ from other Austrian pension funds because we take a complete and comprehen-sive approach to SRI. We do not just look for SRI right from the start as many other funds do, but we look at the whole portfolio. And we do not concentrate on social issues but view SRI under the blanket of sustainability.

“To achieve this, we screen our portfolio externally through an independent provider for critical issues and should any come up, we do further research and either contact the fund’s management to remove the title from the portfolio or open discussions about the portfolio’s content.

“In fact, it has been less than 0.1% of cases where we have started a procedure and said if the manager doesn’t sell this title we’ll sell the entire portfolio and look for a different manager.

“Under Austrian law we are obliged to deliver a transparency report about sustainability. This has to show how committed we are to the responsibility we, as a corporate identity, have in investing the money with the best interests of the client.

“There are two types of pension funds in Austria, those that bring SRI into the limelight and want to distinguish themselves by using SRI in an attempt to attract clients, and others, like us, for whom SRI is a significant element in the perspective but who do not want to isolate it.

“We do not dedicate a certain percentage of our portfolio to SRI. Instead we extend this screening process across our whole portfolio.

“Some funds are mainly charity investors. But to us it would be nonsense, for example, to exclude crude oil producers - which are unfortunately needed in our world - from our portfolio because somewhere along the line they are damaging the environment.

“It is important to us not to invest in those companies, which, for instance, are making headlines due to their involvement in pollution scandals.

“But as our approach is an ongoing process it doesn’t exclude certain projects from the start. So we do not necessarily exclude companies that satisfy people’s pleasures such as alcohol, car manufacturers or tobacco producers - although the risk is very high with tobacco producers. But we will only invest in those car producers, for example, that are looking at cleaner alternatives.

“Instead, we have assets in our portfolio for which sustainability is important. We feel that SRI is a topic all long-term investors will have to think about. They will have to assess what investments are sustainable in the long term and what investments are high-risk. If aspects such as sustainability are ignored, investments are likely to bring only short-term success. For example, a company that needs to lay off employees during a restructuring process to survive, but will not employ new ones - if it keeps firing but not hiring - will not be successful in the long term.

“I do not think that investments in SRI and loyalty to members are contradictory but, again, we need to take a comprehensive view. It is a necessity, especially when you look at equity investment, that an enterprise has a continued existence and this raises the perspective of added value because in the end returns are the result of a good added value process. And so an investor always looks at what increases value for an enterprise and what doesn’t.

“Some enterprises do not have the awareness of how fair treatment of employees and adherence to environmental and other guidelines could add value, and for those SRI constitutes high risk for the portfolio. But we regard this awareness of long-term added value as positive.

“We do not want a fundamental SRI portfolio but we are trying to support long-term developments by investing in the ‘good’ enterprises and not in the ‘bad’ ones.”


Edwin Meysmans, managing director KBC Pensioenfonds, which has AUM of €860m

e feel that because as a pension fund we are not only investing the employer’s money but also that of the employees, we have a social responsibility. Our board of directors is divided equally between representatives of the employer and trade unions. SRI and ethical investing are high on the agenda for trade unions and they raise the issue often. And we think SRI is something we should look at.

“We have the SRI principle within our statement of investment principles and we implement it by having agreements in the contracts with our asset manager - at KBC we only work with one asset manager: KBC Asset Management. We state and our asset management agrees, that when it picks stocks or selects countries for bonds it will not only look at facts and figures but also consider other criteria such as environmental and social issues. But we do not invest a certain percentage of our portfolio in SRI. We think you can’t invest, for example, only 10% in ethical funds because that would mean that you would invest 90% in non-ethical funds, which would be a paradoxical thing to do.

“Instead, as a general rule, whenever investment decisions arise we also take socially responsible issues into account.

“But to be honest we don’t really know whether using a SRI strategy pays off in terms of returns. It’s just that we believe that companies that are socially responsible will in the end outperform those companies that are not. However, we have no figures to substantiate that, as it is far too early to tell. Nevertheless, we are convinced that the returns of SRI are at least as good as the returns when you don’t apply SRI.

“Of course our first aim is to get the best possible performance from the pension fund for both the employer and the employees, and we believe there is no contradiction in doing this while at the same time adopting an SRI approach.

“Generally, we see that the appetite for SRI is gradually growing. I’m not really sure but I expect that most large pension funds in Belgium will have a similar approach to SRI as we do, while I anticipate that for smaller pension funds it is not so much of an issue.”