The board of trustees of Migros Pensionskasse (MPK), the CHF29bn (€27.9bn) pension fund for the Swiss retailer, has decided at its last meeting to realign the pension fund’s foreign equity portfolio to the MSCI Climate Paris Aligned index from the end of November.
The Pensionskasse believes that the realignment of its equity portfolio won’t hinder future returns while reducing risks, it said.
MPK has started to divest since the beginning of the year from companies that have a large part of their business in coal mining or coal processing.
It considers such investments, especially holdings in companies active in coal mining, to be a high risk and it has therefore set a low ceiling of 1% of revenues generated from coal mining as a criteria to exclude such companies from its portfolio, it said.
The same principle also applies to external asset managers. MPK’s strategy takes into account climate risks and the consequences of climate change in asset management. It has set the goal of cutting CO2 intensity by 50% in its portfolio to keep global warming at bay.
A further goal for the scheme is to underweight investments in companies involved in activities with high climate risks.
MPK has achieved a positive return of 7.4% at the end of October, it said, adding that the main driver for it was its equity investments, which recorded returns of 17.3%. Real estate and infrastructure investments in Switzerland and abroad – worth around CHF10bn – also showed positive returns of 7.6%.
The Pensionskasse allocates CHF10.21bn to nominal value investments, CHF8.60bn to equities, CHF10bn to real estate and CHF542m to gold.
MPK reviewed its investment strategy to increase its allocation to real assets by seven percentage points to 37%, reducing at the same time exposure to equities by two percentage points to 28% and adding 2% to ts gold allocaiton to reduce investment risk.
The Pensionskasse invests in Swiss and foreign real estate with a 4% allocation to real assets through a new infrastructure category, which includes renewable energy and wind or solar energy power plants.
MPK has decided on a one-off payment of CHF500 to members entitled to old-age, disability, spouse or partner pension, on the back of its positive financial position, it said.
It has also disclosed three-way saving options to adapt occupational pension pay-outs to individual situations under a new defined contribution (DC) scheme.