Publica, Switzerland’s largest pension fund with CHF39.4bn (€41.3bn) in total assets, has started to use bespoke ESG benchmarks to invest in emerging markets government bonds, it said in its latest responsible investment report published today.

The scheme defines its investment universe for bond investments in emerging markets with FTSE Russell, with countries eligible for investments picked based on the assessment of Freedom House and the V-Dem Institute, an independent research institute on democracy based at the Department of Political Science at the University of Gothenburg, it said.

Countries are underweighted or overweighted based on ESG criteria including energy, climate, biodiversity, social inequalities, human capital and innovation, corruption, and political stability, among other criteria, according to the report.

“The aim of our new bespoke emerging markets ESG benchmarks is to improve the risk/return profile of the government bond portfolio,” said Manuela Guillebeau, Publica’s specialist in sustainability for asset management.

Publica will fully implement the ESG benchmarks with its current asset managers in the first half of this year, it said.

Guillebeau Manuela

Manuela Guillebeau at Publica

The scheme is also gradually implementing its responsible investment strategy in private markets, for the first time looking at how the implementation is progressing with its asset managers, the report disclosed.

It worked with 17 asset managers on guidelines intended to increase transparency on ESG for investments in corporate loans, infrastructure, and real estate mortgages, it said.

“This year’s evaluation of the transparency requirements for our private market asset and fund managers revealed an encouraging picture: 16 of 17 asset managers have signed up to [the United Nations’s Principles for Responsible Investment], and 13 out of 17 have set themselves the goal of achieving net zero by 2050,” Guillebeau said.

She added: “The biggest gaps are still in gathering the climate data that are important to us. Here, we are liaising closely with the asset and fund managers to improve the reporting in future.”

The scheme allocates CHF330m to private markets focusing on social aspects. It has also invested CHF755m in green bonds, up from CHF454m invested in 2022, and CHF448m in renewable energy, the report stated.

Publica has also set up the Sustainability Asset Management Exchange (SAMA) platform in its asset management division last year to discuss the topic of impact investing.

Discussions revolved around the UN’s Sustainable Development Goals and their 169 sub-goals, with the scheme eventually prioritising four UN sustainability goals, including clean energy, work and economic growth, and peace, assessing for the first time the contributions made by the companies in its portfolio to these goals.

Looking for IPE’s latest magazine? Read the digital edition here