Pensionskasse Thurgau (pktg), the Swiss pension fund for the employees of the canton of Thurgau with total assets worth CHF4.75bn (€5bn), has changed its strategic asset allocation, cutting its exposure to insurance-linked securities (ILS) as a result of increased climate risks, such as floods or hurricanes, it said in its first sustainability report for 2023/24.

At the same time, pktg has also started to reduce its allocation to real estate globally looking at cyclical and climate risks (including coastal areas), in favour of affordable housing, it added.

The scheme has rebalanced the reduction to ILS by increasing infrastructure investments, it also disclosed. In the first six months of this year, the value of its infrastructure investments increased to CHF360m, corresponding to around 7.1% of total assets.

In partnership with Energy Infrastructure Partners (EIP), a specialist for investments in the energy sector, the pension fund has set up three investment vehicles: the CSA Energy Infrastructure Switzerland with assets worth CHF103.8m, the CSA-Energy Transition Infrastructure worth CHF60.8m, and the Energy Infrastructure Europe 2018 vehicle with CHF71.9m in assets, said Adrian Weibel, the scheme’s chief investment officer and deputy chief executive officer.

Infrastructure recorded 11.19% in returns last year, the highest among the scheme’s asset classes.

Pktg is implementing a strategy to boost investments in systems for climate-friendly energy production, and investments in companies taking advantage of the opportunities offered by climate change, it added.

The pension fund is also reviewing its real estate strategy this year taking into account sustainability and the market environment. It is investing CHF122m in directly held real estate through four large construction projects, which the scheme claims helps it get a step closer to decarbonising its investment portfolio by 2030.

Directly held real estate investments in Switzerland amounted to CHF677m, equating to 13.4% of the scheme’s total assets, as of the end of June, it said.

At the end of 2023, pktg recorded a funding ratio of 104.6%, up from 102.6% in 2022, and achieved net returns of 5.12%, compared with -7.49% in 2023.

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Luigi is IPE's Berlin-based DACH correspondent. His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market. He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile

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