EUROPE - Panellists at the European Pension Funds Conference in Frankfurt have called on SRI/ESG service and product providers to come up with innovative products to help pension funds adapt their investments.
"Asset managers and rating agencies have to provide more customised products adjusted to pension funds in the field of ESG," Olivier Bonnet, head of SRI Strategy at French supplementary pension fund ERAFP, explained.
He pointed out his fund, which is applying SRI strategies to all its investments, is "helping to further SRI research" as each new investment has to be looked at under an SRI perspective and research agencies have to include new investments into their research.
Sander Paul van Tongeren, senior sustainability specialist for Global Real Estate Asset Management at Dutch asset manager APG, is sceptical about SRI service providers.
"We see a consolidation of ESG rating schemes and there are only a few dominant players nowadays which have limited coverage of companies below 40%," he pointed out.
"Their methodology is sometimes unclear. Iit is a ‘black box' to us and we don't really trust this data."
However, Heribert Karch, CEO at German pension provider MetallRente, noted his fund was relying on an SRI index together with additional research to include or exclude certain companies.
He added in Germany regulation prevented a broad use of SRI criteria, especially for insurance-based vehicles because of investment restrictions and diversification regulations.
"In some regulated pension vehicles, when you have the requirement to diversify in certain asset classes and to ensure liquidity every time as well as security, you could argue that SRI diminishes the investment universe you use and therefore, mathematically speaking, it increases risk," said Karch.
The only way to increase SRI investments in Germany was therefore a combination of a furthering of the SRI debate, along with regulatory frameworks in which investment restrictions do not counteract SRI, and new innovations from asset managers.
"There is a lot of work to do in many asset classes apart from equities," said Karch.
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