In depth: how Swiss pension funds are taking action against deforestation | New
In response to a recent report published by Greenpeace accusing Swiss Pensionskassen of a lack of commitment to stop deforestation, several Swiss pension funds have responded with various strategies and actions put in place, including commitment programs to contain the consequences of activities. companies on deforestation, hoping that the results obtained so far would have a ripple effect, by taking additional measures to address the subject.
Members of the Ethos Engagement Pool (EEP) International decided last November to add biodiversity as a fourth pillar to their engagement activities for the coming years, alongside climate change, governance and human rights. the man.
“As part of this new pillar, EEP International members validated a new engagement campaign focused on mitigating deforestation in the soybean and beef value chains,” Vincent Kaufmann, IPE, told IPE. CEO of the Ethos Foundation.
Ethos summarized and published its expectations for companies exposed to deforestation risk in an engagement document in September 2021, then launched the engagement campaign focused on mitigating deforestation by engaging seven multinational companies.
“These companies were selected after a detailed analysis of a large universe of companies according to their exposure to the risk of deforestation, but also their position in exposed value chains, in order to encourage them to implement actions. concrete and measurable actions to stop the destruction of forests. Kaufmann added.
Ethos now hopes the engagement with the seven companies will trigger changes in other businesses, for example with retailers pushing their suppliers.
Depending on the success of this first phase of the commitment on deforestation, Ethos and the members of EEP International will decide whether or not to extend the campaign to other companies.
“In the meantime, Ethos and members of EEP International have also begun to support collaborative engagement initiatives aimed at mitigating deforestation, such as the Investor Policy Dialogue on Deforestation (IPDD) initiated by the Tropical Forest Alliance” , Kaufmann said.
In addition, Ethos addresses deforestation and other biodiversity issues in its regular dialogue activities with Swiss listed companies, he said.
The Swiss Association for Responsible Investment (SVVK-ASIR) is currently engaging with eight companies directly complicit in deforestation, including some mentioned in the Greenpeace report.
“We also address local small business violations, which fall outside the scope of the MSCI World report. Within the group of the world’s most invested companies, violations mainly occur in the supply chain – this means that companies, knowingly or unknowingly, buy from suppliers who have grown their products on illegally deforested land”, Tamara Hardegger, managing director of SVVK-ASIR, said IPE.
Some companies already commit to a policy of no deforestation, but often they fail to implement this policy.
SVVK-ASIR asks these companies to demonstrate how they investigate allegations, identify non-compliant suppliers through systematic monitoring and tracking, so companies know if they are sourcing from illegally deforested land, and end this practice.
“It’s not an easy achievement, but we are seeing progress. One of the companies mentioned [in the Greenpeace report] now monitors 100% of farms of direct origin, up from 90% last year, well ahead of its peers, and has requested third-party verification of farm traceability,” Hardegger added.
According to the report published by Greenpeace Switzerland, Pensionskassen invest at least CHF 60 billion (€61.6 billion) in listed companies that have an impact on the deforestation of tropical forests with their activities.
The amount invested in shares of companies contributing to deforestation worldwide corresponds to approximately 5% of the total assets held by Swiss pension funds.
Process and due diligence
The report found that the pension fund Pensionskasse Post and Basel-Landschaft (BLPK) holds more than 500 million francs in companies with a high risk of deforestation, while the pension fund of the Swiss retail company and de gros Coop-Gruppe (CPV/CAP) invests several hundred million Swiss francs.
ComPlan, the Pensionskasse of the TX Group, is also listed as investing more than 50 million Swiss francs in such ventures, with the Pensionskasse of the city of St. Gallen investing several tens of millions of Swiss francs.
Pensionskasse Post responded to a request for comment via SVVK-ASIR, whose members also include the Pension Fund of the Canton of Zurich (BVK), compenswiss, comPlan, Publica and BLPK, among others.
Roman Denkinger, head of asset management at ComPlan, told IPE that the program selects companies that “severely and consistently violate the UN Global Compact”. When this is the case, the program partners with SVVK-ASIR’s partner, Sustainalytics, to initiate an engagement process. “If the engagement is not successful, the company may end up on the exclusion list of SVVK-ASIR,” he added.
Companies are contributing to deforestation around the world with their production processes, supply chains, products and services, says the Greenpeace report, adding that the financial sector plays a key role in companies’ transition to a sustainable business model.
Christian Grossi, CEO of Pensionskasse TX Group, told IPE that asset managers responsible for investing pension fund assets receive the exclusion list from SVVK-ASIR.
“Thus, the Pensionskasse of the TX Group ensures that investments comply with Swiss standards and laws, also in terms of sustainability. All securities are managed by asset managers who are members of the Swiss Association for Sustainable Finance and/or signatories of the United Nations Principles for Responsible Investment (UNPRI)”, added Grossi.
The majority of asset managers now have their own sustainability research processes and incorporate relevant criteria in various forms into their investment process, the CEO said.
According to Greenpeace, pension funds make little use of their property rights to change potentially dangerous corporate behavior, delegating engagement activities to organizations such as the Ethos Foundation or SVVK-ASIR.
Greenpeace said SVVK-ASIR does not have a specific program to stop deforestation, and it is unclear if or how deforestation is part of the association’s engagement program as a whole.
“Unfortunately, Greenpeace did not contact us for verification. Deforestation is a serious violation of our normative base and international standards. Therefore, it is addressed under our Standards Violation Engagement Program,” Hardegger said.
Deforestation is already a topic of SVVK-ASIR’s engagement program which deals with 130 cases of offences, including environmental destruction, corruption or human rights violations, the general manager added. .
Hardegger also noted that deforestation is also “hiding” in another of the association’s current topics of interest: child labor in the cocoa supply chain, which will be addressed in an upcoming report released this month- this.
Ethos published clear and targeted demands regarding deforestation in its international engagement program for seven companies out of the more than 140 companies held by Swiss pension funds in their portfolios taking up deforestation risk, Greenpeace said.
“Deforestation is obviously a very important issue for Ethos and the members of its engagement pools, but as a small research house we also need to be careful with our resources and make sure we address as many material issues as possible. in our dialogue and activities with listed companies,” said CEO Kaufmann.