Swiss pension fund Publica, with assets under management of CHF39.5bn, plans to reinforce its knowledge and expertise in biodiversity in the next few years to better assess the potential risks resulting from investments.
The loss of biodiversity, closely linked to climate change, was of high relevance last year in the fund’s strategic risk analysis examining relevant ESG and systemic risks, Manuela Guillebeau, Publica’s specialist in sustainability for asset management, told IPE.
The Taskforce on Nature-Related Financial Disclosures (TNFD) offers a platform to measure and communicate biodiversity risks among companies and investors, she added.
According to the analysis, issues relating to efforts made to adjust to climate change remain a top priority for Publica, that is also closely looking at the potential impact of a power shortage on its portfolio, and geopolitical conflicts between the US and China.
The pension fund has published for the first time a report on responsible investing to highlight some of the progress made last year, and at the beginning of 2023.
It is targeting a net zero stance for its overall portfolio by 2050, cutting CO2 emissions in its Swiss real estate portfolio by 50% by 2035, CO2 intensity by at least 40% compared to the reference index for corporate bonds in the US and Europe, and reducing transitional and physical risks in its equity portfolio, it said in the report.
The pension fund has brought to an end the search for a partner to develop a bespoke ESG benchmark for investing in emerging market government bonds, adding Scope 3 emission data to calculate greenhouse gas emissions in a climate-efficient equity index.
Publica introduced a climate-efficient equity index in 2020 and was upgraded in the first half of this year with Scope 3 data emissions, at the same time expanding exclusions in the coal industry to companies producing electricity from coal, according to the report.
Moreover, the scheme has gradually integrated a responsible investing approach in private markets, working with external asset managers, allocating CHF74m to social housing projects.
It has also invested CHF454m in green bonds and financed renewable energies projects with CHF212m.
The scheme has signed a partnership agreement to measure the contribution companies in its equity and corporate bond portfolios make to the UN Sustainable Development Goals, planning to disclose more information on the matter in its next report in 2024.
“For equities and corporate bonds, we primarily address the issue of biodiversity loss in dialogue with companies. The SVVK-ASIR [Swiss Association for Responsible Investments] is in dialogue with eight companies that systematically and seriously violate international biodiversity standards,” Guillebeau said.
She added: “For emerging market government bonds, we are currently working on a project to introduce a bespoke ESG benchmark that also takes biodiversity into account.”
An external provider is working with Publica to define the universe of countries and the ESG criteria to weight these countries in the index, ultimately to improve the risk-return profile of government bond portfolios, according to report.