The Pensionskasse for the city of Basel, PKBS, is making efforts to shift its equity and bond investments to ESG indices in the future, instead of aligning them with traditional market indices, said Beatrix Wullschleger, the pension fund’s sustainability specialist.
The idea is to invest assets mostly following the ‘best in class’ principle for individual sectors to pick out green stocks and bonds, she added in an interview with the pension fund’s publication Aspekte, adding that PKBS invests part of its assets passively.
The board of directors for the Pensionskasse has decided to exclude companies active in fossil fuel sectors, or that generate revenues from fossil fuels “of unconventional origin” from its pool of investments.
PKBS has also excluded from its portfolio companies generating more than 5% of revenues from the coal sector. The carbon intensity per million francs invested was therefore 25% below the benchmark last year, it said.
The exclusion of the coal sector from its investment universe meant that in the last few years the pension fund has cut investments in CO2-intensive companies by 46%.
The pension fund will pay attention to direct real estate investments in terms of exiting fossil fuels and promoting renewable energy sources. “We have set ourselves the ambitious goal of achieving net zero by 2040,” Wullschleger said.
PKBS is also considering impact investments through green or social bonds, and renewable energies, to contribute to mitigating climate change or social problems, making the portfolio even more sustainable, she added.
“These investments must be selected with care in order to actually achieve the desired result,” Wullschleger said, adding that “the efficiency of the investments can be increased by taking into account climate risks”.
PKBS had €13.90bn in total assets in 2020, up from €13.58bn in 2019. It recoded a 2.8% return last year, down from 10.91% the prior year, according to the pension fund’s latest financial statement.
The funding ratio fell year-on-year from 105.2% in 2019 to 103.1% in 2020, as a result of the reduction of the technical interest rate from 2.50% to 2.25% and the provisions made for the planned reduction of the technical interest rate.
PKBS underweighted equities in its investment strategy last year while expanding domestic real estate allocations.