Swiss pension funds insufficiently focused on climate change

The majority of the 20 largest Swiss pension funds do not fully consider long-term environmental risks, such as climate change. That can put beneficiaries’ savings at risk financially, particularly over the long term, according to a first survey published today by WWF Switzerland and ShareAction.

WWF, together with Responsible Investment charity ShareAction, has carried out a survey of the 20 largest Swiss pension funds. It analysed how far pension funds invest their beneficiaries’ money sustainably and whether they transparently provide them with information. The survey concludes that the majority of the 20 largest Swiss pension funds do not yet systematically consider sustainability criteria, such as climate change, in their investment decisions.

All 16 of the pension funds that participated in the survey do consider the topic of Responsible Investment, and 13 of those funds also have a relevant policy. However, the survey does show that there is still some way to go before Swiss pension funds exemplify international best practice in Responsible Investment. For example, only one pension fund has developed a strategy on the financial risks related to climate change. Transparency in relation to the actual holdings should also be increased, so that beneficiaries know how their money is invested and can take action when they disagree. Currently it’s rare to see information published that goes beyond the allocation of assets to different types of investments such as equities or bonds.

Good for beneficiaries and the environment

“Pension funds should consider environmental risks in their investment decisions”, explains Britta Rendlen, Head of WWF Switzerland’s Department for Sustainable Finance. Environmental risks, such as climate change, are also often important financial risks for pension funds’ assets. “Responsible Investment is not only important for the environment but is also in the interests of beneficiaries”, she emphasises.

Sonia Hierzig, Research Officer at ShareAction and the report’s author, said: “We’re delighted to have co-produced the first ever survey of Swiss pension funds by Responsible Investment performance, together with WWF Switzerland. The results demonstrate that whilst the 20 funds we looked at do consider responsible investment, there’s a long way to go to adopt international best practice, particularly when it comes to transparency and climate risk management. Investing responsibly is entirely consistent with looking after beneficiaries’ interests – we hope that more Swiss funds will start to consider and integrate environmental social and governance risks into their investment strategies accordingly.”  

 Integrating sustainable investments into the strategy

WWF and ShareAction recommend that pension funds should systematically consider Responsible Investment factors when they make investment decisions, and be open about how they do so. Alongside impacts on climate change, this also includes resource management, labour conditions and wage plans, and other factors. Furthermore, WWF recommends that pension funds actively exercise their voting rights at companies in which they invest directly and engage in dialogue with those companies. Voting rights should be exercised in Switzerland, as well as abroad. Such a course of action implies a cultural change within Swiss pension funds.

Pension funds are important

Pension funds in Switzerland manage CHF 767 billion (USD 804 billion). The 20 largest funds represent around a third of this (CHF 281 billion, USD 287 billion) and were surveyed in this study. Pension funds are among the largest and most influential investor groups in Switzerland. As long-term shareholders they are able to directly influence the decisions of the companies in which they invest. Pension funds thus are among the key players when it comes to creating a more sustainable economy.

Study on investment strategies and transparency

Responsible Investment is an approach which takes into account environmental, social and governance (so-called ESG) factors in the investment process. WWF and ShareAction also looked at the level of transparency of information on Responsible Investment. The study was carried out through desk research, and a questionnaire was sent to the 20 largest pension funds. Pension funds that did not answer the questionnaire were assessed based on publicly available information.

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Colette St-OngeSwiss pension funds insufficiently focused on climate change