CPEG, the CHF21bn (€23bn) public pension fund for the Swiss canton of Geneva, has revealed it is in discussions with asset managers who have exited the climate engagement group, Climate Action 100+ (CA100+).
Speaking on a panel at the IPE Conference & Awards 2024 event in Prague this week, CPEG chief sustainability officer Arthur Dessaix said that he and his team were engaging with exiting asset managers on how they would continue to satisfactorily manage the pension fund’s assets in line with the Paris Agreement.
His comments come as an increasing number of managers have left the group amid the politicisation of the climate action debate.
CA100+ has seen 71 investors exit the climate engagement group since June 2023.
“We have sent letters to the concerned asset managers with a lot of requests for an explanation as to why they’re leaving and how they view the future [once they exit],” said Dessaix.
“And not just why they’re exiting the [climate action] group, but how they think they can also satisfy our views on how they should manage our assets,” he added.
CPEG has a commitment to make its portfolio carbon-neutral by 2050.
Part of its strategy is steered using an implied temperature rise metric and in 2023 it began to disengage from the energy sector with an expectation that the warming associated with the pension fund’s fossil fuel investments will reach 1.5°C at the end of 2025.
Macro stewardship and policy advocacy
Entitled ‘Decarbonisation: Are asset owners in over their heads?’, the panel also involved an exchange about the limits of corporate engagement and the role that investor policy advocacy, or macro stewardship, could play.
While acknowledging the importance of the latter, Peter Lundkvist, head of corporate governance at Sweden’s AP3 noted the challenges for state-owned pension funds of pursuing political agendas.
“When it comes to global climate policy, we make an effort to pursue [climate] issues with the EU,” said Lundkvist. “We have done so many times and will continue to do so.”
He added: “Macro stewardship is important and we can all agree that the lowering of CO2 emissions is the best solution to the climate crisis. It’s a big question for politicians, but it is very very hard for a state-owned pension fund in Sweden to convince its own parliament to change direction on this matter.”
Lindsey Stewart, director of stewardship research and policy at Morningstar Sustainalytics, said that while he felt more people have embraced the concept of macro stewardship, it is not particularly well defined.
Stewart said: “Now that the initial reporting phase of frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD) and International Sustainability Standards Board (ISSB) are more or less complete, what do we want macro stewardship to do?”
He said: “If it is the case of having the financial community go to governments and say they want changes in energy policy, that’s very risky,” Stewart continued. “Particularly in the case of the United States where large asset managers don’t have an appetite for this.”
Stewart also addressed the need for clarity of investors’ stewardship objectives and how they could achieve them.
“There is a balance to be struck between what the end investors in your portfolios actually want versus what whether you think the engagement with the portfolio [assets] will actually achieve the sustainability goals you have set.”
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