Aargauische Pensionskasse (APK), the Swiss pension fund for employees of the canton of Aargau, is broadening the scope of its climate strategy by planning to move its benchmark from emerging market (EM) equities to the MSCI low carbon index target this year, he said. in a financial statement for 2021.
The pension fund has kicked off the implementation of its climate strategy with MSCI low-carbon target indices for its equity portfolio, and it has meanwhile added commodities to the scope of its strategy, a- he said in the statement.
The index is tilted towards 50-70% lower CO2 emissions relative to a market-weighted index.
With a four-pillar strategy, APK was initially committed to engaging with investees, aimed to reduce the risks generated by a deviation in capital market indices, sought to conduct an annual assessment of the impact of its climate strategy on investments and sought to reduce climate risks with a particular focus on equities.
APK has worked with the Ethos Foundation, supported by the Swiss pension fund, to conduct intensive dialogues with greenhouse gas emitters like Nestlé and LafargeHolcim as part of the Climate Action 100+ initiative, it said. he declares.
Engagement with LafargeHolcim and Nestlé led to a “Say on Climate” vote at Nestlé in 2021 and a “Net Zero Journey” at LafargeHolcim, which also includes a “Say on Climate” vote in 2022, he said. added.
APK’s assets under management increased year-on-year by 900 million francs (876 million euros) to reach 13 billion francs in 2021, but with a record performance below its benchmark, according to the press release. Its funding ratio fell from 104.2% in 2020 to 108.3% last year.
Last year, the pension fund’s investment strategy generated returns of 7.5% after costs, above the 3.8% achieved in 2020 but slightly below the benchmark of 7.7% , and also below the average annual performance of the UBS Pension Fund Barometer of 8.03%.
APK attributed the underperformance relative to the benchmark to the CHF29.6 million provision it had to make for deferred capital gains taxes on directly held properties. Net returns from real estate held directly amounted to CHF 14.1 million in the year under review, and the net return was 1.53% compared to 6.3% in 2020.
Equities, real estate and commodities were the main drivers of returns last year. According to the statement.
Rising interest rates resulted in negative absolute returns on face value investments. Only emerging bonds in hard currencies contributed positively to the portfolio’s performance with a return of 2.5%.
APK allocates 2.6% of its assets to cash, 9.5% to Swiss bonds, 2.9% to foreign bonds, 4.9% to foreign corporate bonds, 3.4% to emerging hard currency debt , 1.1% to emerging debt in local currency, 10.2% to Swiss equities, 14.3% to foreign equities, 4.1% to emerging equities, 4.9% to mortgages, 7.8% to loans , 6.4% to direct Swiss real estate, 6.2% to Swiss real estate (foundations), 4.6% to Swiss indirect real estate, 4.5% to foreign indirect real estate (hedged), 3.4% to commodities (hedged), 4.3% to infrastructure (hedged), 1.8% to private debt, 2% to insurance securities (hedged) and 1% to other alternative investments (hedged) , he said in the statement.