ERAFP, France’s mandatory pension scheme for civil servants, will be looking to “perfect a carbon-free investment strategy” over the coming years, it said after having for the first time disclosed how its equity portfolio is aligned with climate change mitigation goals.
Under a new law on the “energy transition for green growth”, French institutional investors have to report on how environmental, social and governance (ESG) considerations in general feed into their investment approach, but also specifically on their approach to climate change-related risks and how this contributes to limiting global warming.
The disclosure is required as of next year, to be provided in 2016 annual reports.
ERAFP said it decided to “step ahead of these general requirements by setting forth its responsibility to beneficiaries with regard to climate change in its annual report as from this year”.
The €24bn* pension fund said that it has for the first time published a measurement of how the energy mix of its equity portfolio compares with energy mix scenarios advocated by the International Energy Agency (IEA) for 2030 and 2050.
It said that at the end of 2015, the proportion of fossil fuels in ERAFP’s portfolio was already aligned with that formulated by the IEA for 2030, but that there were shortfalls in other areas. The proportion of renewable energies, for example, would have to double in order to meet the target level for 2030.
It said that “over the coming years, the gradual rebalancing of ERAFP’s portfolio for better alignment with the most favourable climate scenarios can be envisaged through several approaches”.
“In the wake of this first assessment,” said the pension fund, “the challenge facing ERAFP over the coming period will be to perfect a carbon-free investment strategy.”
French pensions mutual UMR has made its first purchase under a €150m real estate mandate awarded to Swiss Life REIM (France) earlier this year.
The investment manager purchased a 3,600sqm office building in Paris for UMR, with Northstar the seller.
The €9.1bn pensions mutual runs four supplementary pensions schemes, the flagship one being the Corem regime.
In 2015, the Corem scheme achieved a return of 4.18% on its property investments, which, with a market value of €682m as at the end of December 2015, represented around 9% of total Corem holdings.
In its 2015 annual report, the pensions mutual said it remains on the lookout for real estate investments, with a focus on the most dynamic markets, such as office assets in Germany.
In other news, France has announced that it plans to issue green bonds, which it said would make it the first sovereign to do so.
The announcement was made today by Ségolène Royal, environment minister, and Michel Sapin, minister of the economy and finance; Sapin has taken on the economy brief following the resignation of Emmanuel Macron, who is aiming to run for president next year.
The green bond issue is planned for next year, market conditions allowing, according to the ministers. The funds to be raised are intended to go towards financing green investments as part of an investment programme due to be presented this autumn, according to a statement.
*As at 30 April 2016