Greenpeace Luxembourg has called on the Board of Directors of the Luxembourg Pension Fund (Fonds de Compensation - FDC) to adopt a Paris-aligned future investment strategy.
After analysing the 2020 Annual Report of the FDC SICAV, published last week, Greenpeace Luxembourg has concluded that the Pension Fund continues to "be off track" when it comes to meeting the objectives of the Paris Agreement.
The non-governmental environmental organisation noted that the FDC "does not seem to [be following] a coherent strategy in its pursuit of sustainability". While the fund's investments into the "Carbon Majors" (the highest emitting companies) have decreased, its investments into coal companies increased from €257 million in 2019 to €289 million in 2020. Greenpeace recalled that coal is the most climate-damaging fossil fuel and that global coal use in electricity generation has to be phased out by 2030 in order to avoid the worst effects of the climate emergency. The NGO added that some of the FDC's ESG-labelled sub-funds invested in oil, gas and other carbon-intensive companies as well as in the nuclear sector last year.
"Again this summer we are witnessing the devastating effects of climate change around the world, and yet the decision makers at the FDC are not taking the necessary steps to put an end to climate-damaging investments". commented Myrna Koster, Climate Justice Campaigner at Greenpeace Luxembourg. "According to a recent survey conducted by TNS Ilres on behalf of Greenpeace, 47% of the country's population does not agree with the FDC investing into fossil fuels. Abandoning carbon-intensive investments in favour of environmentally sound assets would allow the FDC to eschew financial risks and safeguard the pensions of current and future retirees".
According to Greenpeace, on paper, sustainability does seem to have become a prominent concern for the FDC. Last year, the fund published its first Sustainable Investor Report, which stated that "[a]s an institutional asset manager, FDC is aware of its ecological, social and good governance responsibilities". The NGO added that incorporating environmental, social and governance (ESG) and sustainability aspects into its operating model was also a recurring theme in its 2020 Annual Report. In addition, the FDC stated that it would revise the fund's approach in the course of this year "in order to further integrate ESG and sustainability criteria into its investment strategy".
Greenpeace maintained, however, that the FDC as well as policy makers continue to refer to the fund's mandate "to ensure the long-term viability of the general pension insurance scheme" to justify continuing to invest in polluting companies. This in spite of the fact that the FDC's 2020 Annual Report showed that there was no conflict between the FDC's mandate and investing sustainably. The report also revealed that some of the Pension Fund's sustainably managed sub-funds performed substantially better than their benchmarks, thus "proving that sustainability and profitability go hand in hand".
"Sustainability is a pillar of Luxembourg's nation branding yet the country's sovereign pension fund FDC still fails to live up to this commitment", said Martina Holbach, Climate and Finance Campaigner at Greenpeace Luxembourg. "Greenpeace calls upon the FDC Board of Directors to bring about the necessary measures to adopt an ambitious and coherent sustainability strategy for all its investments and to align these with the climate objectives of the Paris Agreement".
