Switzerland’s biggest pension fund Publica, with assets worth CHF42.5bn (€40.8bn), has set the binding target of reaching a net-zero status in its investment portfolio by 2050 at the latest, and is also excluding nuclear weapons from its investments.
The Pensionskasse will reduce CO2 intensity carried by corporate bonds, and design a path to cut CO2 emissions from directly held real estate in Switzerland.
Moreover, the pension fund will carry out dialogues with companies emitting a large share of CO2 to help them transition to more responsible business models, with a view to excluding coal companies from its portfolio in the future.
As a further measure to reach net zero, Publica will invest in renewable energy, such as wind parks or photovoltaic installations, in private markets. It is also already introducing step by step a climate-efficient equity index to navigate risks and opportunities based on different climate scenarios.
Manuela Guillebeau, specialist in sustainability for asset management at Publica, told IPE that in the short-term the the Pensionskasse’s portfolio will not change significantly, as many of the measures implemented already support its net-zero target.
“In the medium to long-term, we want to review these measures with regard to the net-zero target and strengthen them or add further mechanisms,” she added.
According to its latest financial statement, top investments include equities in developed countries equities, excluding Switzerland, worth CHF6.84bn, public corporate bonds worth CHF4.24bn, and bonds, excluding Switzerland, worth CHF4.19bn.
Emerging market equity investments are worth CHF3.41bn, domestic real estate CHF2.95bn and foreign real estate CHF1.64bn.
Publica recorded a net return of 4.2% last year.
“All previous measures [to reach net zero] were implemented while maintaining the current risk/return profile. With the [latest] measures, we can improve returns in relation to the risks in the long-term,” Guillebeau said.
A comprehensive strategy
Publica will aim to reach its net-zero target to limit global warming below 2°C agreed in the Paris Climate accord, it said, adding that the 2050 net-zero emissions target is essential for the cause.
The scheme has come up with its own concept of responsible investing, which is constantly adapting, for example by exercising shareholder rights.
It has been exercising its voting rights in 150–200 foreign companies whose business activities may conflict with Swiss norms since last year.
Now the net-zero commitment means that Publica will have to continue to deal with the issue of climate, Guillebeau said, adding that it “will review and strengthen current measures,” as setting intermediate goals is also part of the process.
“We have already done this in some cases, for example with direct real estate in Switzerland, in this case CO2 emissions will be reduced by 50% by 2035.”
Publica has also decided to exclude manufacturers of nuclear weapons from its portfolio, a decision taken with an eye on the UN Treaty on Prohibition of Nuclear Weapons (TPNW) which came into force January 2021.
The Pensionskasssen has therefore sold at the end of November all shares and corporate bonds held in companies producing nuclear weapons.
To rebalance its portfolio Publica bought securities from firms in which it already invests in. It had already excluded manufacturers of cluster munitions, anti-personnel mines and nuclear weapons from non-nuclear weapon states from its portfolio.
Last year the pension fund joined four organisations active in the field of sustainable investments internationally.
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