The CHF17bn (€18.6bn) pension fund of the city of Basel, Pensionskasse Basel-Stadt (PKBS), has anchored its first principles for impact investing to financial returns and its exclusion policy.
According to the core principle, impact investments are used to achieve a measurable social or environmental impact, provided market-compliant returns are achieved.
If impact investments fail to lead to positive developments despite the exercise of voting rights and engagement activities, the pension fund’s board of directors can, as a last resort, exclude the company from its investment portfolio.
For now, the pension fund has identified mortgages, real estate and gold as the three asset classes through which it can achieve a positive social and environmental impact.
PKBS said in a statement that it offers members a “climate mortgage” promoting the switch to renewable heating systems and supporting the expansion of photovoltaic installations through preferential terms.
“In real estate, we promote the installation of photovoltaic systems and drive energy-efficient renovations of existing buildings,” the pension fund added.
Moreover, new investments in physical gold are made exclusively in green gold to meet standards on environmental protection, as well as the health, safety and human rights of miners.
The pension fund added that it assesses opportunities for impact-oriented investments across both existing and new asset classes.
PKBS has not defined a specific allocation target for impact investments.
Instead, investments with an impact are carried out “where possible and appropriate”, according to the “circumstances and objectives” involved, the pension fund said.
The impact investing guidelines form part of an expanded set of sustainable investment principles adopted by PKBS.
The revised sustainable investment framework now comprises 11 principles and includes, for the first time, guidance on impact investing.
Under the updated framework, PKBS is focusing not only on climate change, but also on human rights and biodiversity.
According to the pension fund’s latest sustainable investment report, failure to address these three areas could have financial consequences.
PKBS warned that its assets could lose value if climate change accelerates, biodiversity continues to decline, or human rights are violated.
