Fonds de Pensions Nestlé, the occupational pension scheme for the employees of Nestlé in Switzerland, has classified investment opportunities in private equity with a positive ESG impact, particularly climate impact, as “top priority”, according to its annual report for 2022.
The move is part of its allocation programme, the scheme said, adding that it will also integrate a new climate-risk component among the parameters of its asset/liability studies from this year.
The fund’s investment committee will continue the work started last year to add new asset classes to the scheme’s investment portfolio by conducting this year a further asset/liability management study to potentially adopt a new investment strategy.
Moreover, also this year, the scheme will establish a climate-risk management framework for investment opportunities that will be integrated in the pension fund’s sustainable investment policy, it added.
Last year, the pension fund carried out a scenario analysis on the expected financial impact of climate risk on its investments, concluding that the financial impact would be “negative but manageable”, according to the annual report.
Peter Vogt, president of the board of trustees at Fonds de Pensions Nestlé, said the investment committee and the management of the pension fund stepped up efforts last year with regard to sustainability, in line with the adoption of a charter for sustainable investment in 2018.
It will consider the introduction of an ESG monitoring mechanism for listed Swiss real estate.
It has, instead, rejected the idea of giving out a dedicated mandate for so-called green bonds, that the scheme considers still not diversified enough, while the pension fund’s corporate bond managers already hold a significant share of green bonds under their mandates, the report disclosed.
The scheme’s assets under management declined last year to CHF7.38bn from CHF8.73bn in 2021 on the back of cumulative losses of -13.6%. Its funding ratio fell from a record high of 127.4% in 2021 to 108.3% last year, the report added.
Fonds de Pensions Nestlé outperformed its strategic benchmark by 0.9%, mainly through returns achieved with investments in non-listed foreign real estate, private equity, and emerging market bonds, but its performance, however, remained 3% below the performance of other Swiss pension schemes, mainly because of losses in foreign currency bonds and listed foreign real estate.
The scheme invests 39.7% of its total assets in bonds, 25.3% in equities, 22.6% in real estate, 10.5% in alternatives, 0.4% in infrastructure and 1.5% in cash, according to the report.
Liabilities in 2022 remained at the previous year’s level of CHF6.81bn, while reserves set aside to rebalance market fluctuations declined strongly to CHF565.5m from CHF1.37bn in 2021.
Negative returns and a declining funding ratio led the board of trustee of the pension fund to apply a minimum interest rate on members’ saved assets of 1%, steering clear from increasing the level of pension benefits.
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