Romain Schneider, Luxembourg's Minister of Social Security;
Credit: MSS
During a press conference on Thursday 10 December 2020, Luxembourg's Minister of Social Security, Romain Schneider, and the Pension Fund (Fonds de compensation - FDC), in the presence of its president, Fernand Lepage, presented the first investor report responsible for the FDC.
The legal mission of the FDC is to manage the reserve of the general pension scheme in order to guarantee its sustainability. Investments must respect the principle of appropriate risk diversification.
The FDC assured that it is aware of its ecological, social and good governance responsibility, having formalised this in 2010 in its responsible investor policy. The latest development of this policy is the publication of the first responsible investor report, which makes it possible to draw up an inventory and publicly report on the FDC's commitment.
The report is split into two parts: a detailed presentation of the responsible investor policy and a detailed climate analysis. The latter has three components: the carbon footprint of individual portfolios; a climate analysis carried out by Trucost, an external and independent company; a climate analysis carried out by the FDC based on the Paris Agreement Capital Transition Assessment (PACTA) tool.
At the level of individual portfolios, the FDC was able to assess whether the carbon footprint is lower or higher than the value of the respective benchmark index with sixteen portfolios, representing 95% of the assets of the SICAV (collective investment scheme). Eleven portfolios presented a smaller footprint.
The main part of the report was the Trucost analysis, which complies with the French law on energy transition and the recommendations of the (Task Force on Climate-related Financial Disclosures (TCFD).
Trucost's analysis covered the following areas: carbon footprint; environmental footprint; exposure to stranded assets and fossil fuel activities; emissions avoided: analysis of FDC green bonds; 2°C alignment according to transition trajectories and according to the energy mix; the financial risks associated with climate change.
The last part of the report included the analysis of the PACTA tool (developed by 2° Investing Initiative) which examines the exposure of portfolios to climate-related sectors and assesses their alignment with various climate scenarios.
Trucost's analysis showed that the FDC's portfolios perform positively against benchmarks. Moreover, the consolidated portfolio of equities and corporate bonds showed lower exposure to stranded assets as well as to fossil fuels and activities compared to the respective benchmark. The PACTA analysis allowed for similar conclusions.
The analysis also showed that the portfolio is on the trajectory of a warming between 2° and 3°C. Nevertheless, the energy mix of the FDC portfolio is currently close to the future energy mixes necessary to comply with the 2°C objective.
Minister of Social Security, Romain Schneider, underlined that this first report constitutes an additional step for the transparency of the investment policy of the FDC and makes it possible to demonstrate its commitment as a responsible investor: “Even if everything is not yet perfect, this report shows us that we are on the right track".
The FDC confirmed that it would regularly monitor developments in the field of sustainability and adapt, if necessary, its investment policy.
The report is available in French and English on the FDC website.
