Migros Pensionskasse (MPK), the CHF29.7bn (€30bn) pension fund for the Swiss retailer, has cut its investment portfolio CO2 footprint by 51.6% last year, therefore reaching its target for 2030, according to the fund’s 2021 sustainability report.
The Weighted Average Carbon Intensity (WACI) of its entire investment portfolio is 81.4 tons of CO2 per million revenue, compared with 168.2 tons of CO2 per million revenue of the standard benchmark, the report added.
The Task Force on Climate-related Financial Disclosures (TCFD) recommends to apply the WACI to compare a portfolio of equities and corporate bonds with a benchmark.
MPK took another step toward supporting the goals of the Paris Agreement in 2021, switching its foreign equity portfolio to Paris Aligned Benchmarks.
With the benchmarks the Pensionskasse underweights or excludes companies generating higher CO2 emissions, and overweights those generating a lower amount of emissions. This means that its equity portfolio has a significantly better carbon footprint compared to standard benchmarks.
According to Migros, equity investments have improved their performance since the introduction of ESG indices, meaning that taking sustainability aspects into account in the investment process can boost returns, it said.
For its corporate bond portfolio, MPK applies the Bloomberg Barclays MSCI ESG Weighted indices.
The Pensionskasse has set a CO2 reduction target in its equity and corporate bond portfolios by 50%, compared with the standard benchmark, by 2030.
MPK has allocated in 2021 CHF132m to build a “Clean Energy” portfolio with investments in renewable energy, solar, wind and hydropower, and to finance innovative solutions for the production of green hydrogen.
It has set the goal of investing at least CHF300m in total in clean energy infrastructure.
The pension fund is planning to further invest in energy systems that have a positive impact on climate, for example those used to generate or store renewable energy, and in green bonds issued by governments or companies that intend to reduce their CO2 emissions, it said in the report.
Its share of investments in green bonds increased from CHF100m in 2019, to close to CHF200m in 2020 and to over CHF200m in 2021, according to the report. Investment in gold grew to CHF550.8m over the course of 2021, equaling to a 1.9% of total assets, it added.
MPK excludes from its portfolio companies involved in “serious misconduct” such as violation of certain standards according to standards set by the Swiss Association for Responsible Investments (SVVK-ASIR), or violation of the UN Global Compact guidelines (MSCI Red Flags).
Based on its climate strategy, Migros excludes companies generating more than 1% of their revenues from coal mining or, in the case of utilities, those that generate more than 30% of electricity production with coal.