The majority of Swiss pension funds integrate environmental, social and governance (ESG) criteria to invest in alternative asset classes, according to a survey conducted by pension fund association ASIP.

The research showed that 52% of pension schemes use sustainability criteria to invest in private equity.

Pension funds tend to apply criteria such as exclusion, reduction of climate risks, ESG integration in portfolio analysis, and the United Nations’ Sustainable Development Goals (SDGs) including social housing.

ASIP found that 55% of respondents put in place a variety of sustainability strategies for real estate investments as well.

Sustainable investments in real estate take into account CO2  emissions, certification of buildings, energy consumption, measures to improve efficiency, zero-emission buildings, fossil fuels and the use of toxic components, among other criteria.

In total, 95% of pension funds surveyed invest in real estate.

ASIP’s survey – which surveyed 160 pension funds last month – found that 57% of respondents had assets under management worth between CHF300m (€273m) and CHF1bn, and 43% with assets between CHF1-3bn, or over CHF3bn.

Overall, 55% of participating schemes referred to a list published by the association for responsible investments SVVK-ASIR to exclude companies from investments, and 39% had anchored investments to sustainability.

A third of respondents exercise voting rights for companies abroad, and 40% participate directly or indirectly in engagement with companies they invest in.

Almost half (47%) of the schemes surveyed had direct equity investments, and over 90% were invested in collective investment funds.

According to the survey, 52% of the pension funds applied passive ESG criteria such as exclusion in direct equity investments, while 21% had started the process to apply such policies – 27% of the schemes did not integrate sustainability in direct equity investments.

On the other hand, 36% of the pension plans researched applied positive criteria such as best-in-class, 33% had started discussions to use such policies and 31% did not integrate positive criteria for direct equity investments.

Less than half (42%) of participants applied negative criteria for sustainable investments in collective equity funds, 28% had started to consider such criteria and 38% did not apply them.

The research found that only 28% of the Swiss schemes took into account positive criteria such as ESG fund ratings for collective equity funds, 35% had started to consider them and 37% did not use positive criteria for equity investment funds.

It also showed that half the plans used positive ESG criteria such as exclusion in direct corporate bonds investments, 30% had started a process to apply the criteria and 20% did not apply them.

The study revealed that the most relevant reasons for integrating sustainability in investment strategies were conviction (60%) and risk management (51%).

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