Fonds de Pensions Nestlé, the CHF7.6bn (€7.9bn) occupational pension scheme for the employees of Nestlé in Switzerland, has adjusted its strategic asset allocation (SAA) in light of higher interest rates, adopting a specific climate policy, according to the scheme’s financial statement for 2023.
Under the new strategy, the scheme has reduced its exposure to real estate by 2 percentage points, while increasing its allocationn to parallel bonds and listed equities.
Nestlé pension fund has exited most of its listed international real estate investments because of their close correlation with equity markets, offering limited diversification within its he investment portfolio, it explained in the statement.
The new SAA, approved by the board of directors following an asset/liability management (ALM) study, foresees 28% of total assets invested in equities, including foreign and Swiss listed equities, 40% in bonds (split equally between Swiss and foreign bonds), 19% in real estate (mainly in Switzerland with 16%), and 3% in foreign real estate.
Additionally, the pension scheme targets 4% to infrastructure, 2% to cash, and 7% to private equity, according to the statement.
The new investment strategy has an expected returns of 3.6%, 1.8 percentage points above the scheme’s required return, which is estimated to be 1.8% for the duration of the 2023 ALM study (assuming an unchanged level of benefits relative to 2019), it added.
The actual allocation slightly diverges from the SAA, with 28.3% of total assets invested in equities, 41% in bonds, 16.2% in Swiss real estate, 2% in international real estate, 0.9% in infrastructure, 0.2% in hedge funds, and 10.3% in private equity, the statement noted.
The pension fund is kicking off its fifth private equity investment programme this year, and it has already appointed an external asset manager specialising in private equity investments, it said without disclosing the name of the manager.
It has decided to increase its private equity investments with high ESG impact to 20% under the new plan for the asset class, as opposed to 7.5% in the previous programme that began in 2020.
The main ESG-related strategic initiative in 2023 for Nestlé pension fund was the adoption of a specific climate policy for its investments, which is part of the scheme’s responsible investing policy dating back to 2018.
The climate policy lays out a more specific framework to manage the climate impact of its investments, defining the commitments of the pension scheme to reach the goal of the Paris Agreement, in line with Nestlé group’s climate policy.
The climate policy is being implemented on the basis of 2027 targets for listed equities, corporate bonds, Swiss real estate and infrastructure. It will be reviewed regularly and adjusted in line with any legislative changes, and with developments in the financial sector regarding climate commitments, it said.
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