Greenpeace Luxembourg has published the results of its first finance briefing on the investment policy of the Fonds de Compensation (FDC), the Luxembourg state's sovereign pension fund.
Connected by videoconference, German economist Dr. Martin Granzow presented yesterday his report "Approaches for a better integration of climate criteria in the investment decisions of the Compensation Fund". Dr. Granzow is a graduate industrial engineer and doctor of economics with ten years of professional experience as a management consultant, among others at Accenture Strategy. In 2017, he founded Nextra Consulting to support companies in implementing a Green Transition. He also works as a lecturer for the Frankfurt School of Finance & Management and is editor and author of numerous publications.
In his Nextra Consulting report, Dr Granzow rated the FDC as "unsatisfactory" in terms of sustainability. The report stressed that the pension fund is "required by law to invest in a broadly diversified portfolio with optimal risk/return considerations to ensure the long-term viability of the pension system". The fund is also "subject to fiduciary duties and must consider the interests of its beneficiaries when investing capital". A review of current practices in FDC's core business revealed that "sustainability criteria have not yet been consistently integrated into investment decisions". In addition, the fund has failed to "establish transparency with regard to sustainability aspects in the past".
In order to remedy these shortcomings, the report stressed that "immediate action must be taken by policymakers and FDC management", i.e. politicians are asked to "send a clear signal without delay that the integration of sustainability risks is an essential part of the FDC's mandate" and the fund should "make a clear commitment to achieve the Paris climate targets and [...] immediately establish transparency on its own sustainability performance".
The report also recommended that the fund "immediately formulate its own strategy to meet the Paris climate targets, develop and implement the necessary analytical methods, define much more ambitious targets for mandated asset managers and then regularly monitor compliance with them". For their part, the government and associated authorities should "facilitate the work of the FDC management through a catalogue of supporting measures, leverage the transfer potential of existing best practices for the fund and [...] ensure an exchange of knowledge that helps other trustees in Luxembourg to align their investment portfolios with the Paris climate targets".
On the other hand, the report recognised that "the fund has already developed a guideline for responsible investing and for some years has been paying attention to the consideration of sustainability criteria when selecting asset managers for the various sub-funds".
The environmental NGO Greenpeace has long criticised the FDC for alleged greenwashing practices.
