The challenge was to develop a pension fund climate strategy that considers both climate risks for the organization and climate impact by the pension fund. The climate strategy had to give clear guidance for the future while keeping enough flexibility for a step-by-step implementation approach.
The Pension Fund of the Credit Suisse Group (Pension Fund) realized the urgency and duty to incorporate sustainability goals into its operations and planning. The Pension fund had already established a general sustainability strategy focused on exclusions of particularly controversial economic activities, as well as the exercise of ownership and voting rights (engagement and voting). Moreover, the Pension Fund was determined to address the matter of climate change explicitly by setting out and implementing a climate strategy.
Starting in 2018, the Pension Fund established an ESG Committee (environmental, social, governance), responsible for the implementation and monitoring of its sustainability strategy. In March 2021, the Pension Fund also joined UN-PRI (UN-led Principles for Responsible Investment), showing its unequivocal commitment to sustainability in its capital investments. The climate strategy envisioned therefore had to be in line with the previously established sustainability strategy as well as UN-PRI.
To the Pension Fund, sustainability needed to be apprehended in a holistic manner with its long-term investment strategy and the existing and future pension commitments to its insurees. The overarching principle of the pension fund is in fact twofold: to take into account the impact of (a) climate change on its business’ risks and opportunities, and (b) its investments on the economy, environment and society, and in turn on its insured members (see “Double materiality”). The board of trustees is convinced, that considering the impact of its investment decisions serves the long-term interests of the communities it serves and their beneficiaries. In doing so, the Pension Fund is mindful of striking the right balance between the various needs of its insured population, whilst safeguarding its main duty for a secure pension scheme.
Materiality guides the overall sustainability focus of a company. Current sustainability regulations and sustainability reporting standards lay the foundation for a materiality matrix that incorporates the concept of “double materiality.” Double materiality looks at the material topics from two different perspectives:
a) Outside-in impact perspective
b) Inside-out impact perspective
Specifically, business activities are assessed on the impact these activities have on long-term business success (outside-in) as well as the environment, the people and the economy (inside-out).
The Pension Fund is focused on relentlessly expanding its approach to sustainable investment, capturing these changes in new policies, and applying these policies holistically to the various asset classes. At the outset, our approach was guided by the answers to the three following questions:
- How does the Pension Fund wish to balance climate risks and climate impact?
- What is the level of ambition regarding the different asset classes?
- How can the Pension Fund develop a strategy that lays the foundation for future actions while at the same time allowing for flexibility in implementing the necessary following activities?
We followed an integrated and step-by-step approach, and the ESG Committee of the Pension Fund played a vital role during this process. In workshops and feedback sessions, valuable feedback from the members was gathered on priorities and prior activities, enabling us to outline the steps that needed to be followed. This work helped us to set out the next most urgent steps to establish a climate strategy together:
- Analysis of the current investment situation at the Pension Fund and resulting gaps regarding the climate strategy. This analysis also entailed a peer analysis.
- Clarification of the implications of different ambition levels; Sustainserv thereby assisted in the decision-making process to define an appropriate ambition level.
- Leading of a workshop resulting in the determination of (a) the climate strategy goals to be pursued, (b) the Pension Fund’s position on climate risks and climate impact, and finally, (c) how resulting instruments were to be incorporated in the strategy. Discussions among the ESG Committee members illustrated that the Pension Fund strives for an approach balancing the risks and impact of climate change in its strategy.
- Separation of the potential instruments into two categories/perspectives described above: on the one hand, climate risk management (“outside-in impact”), such as regulatory or physical risks, and on the other hand, impact of the Pension Fund’s business activities on the outside world (“inside-out impact”).
- Definition of a draft climate strategy based on the results of the workshop, including various feedback rounds with the ESG committee members of the Pension Fund.
- Presentation of the climate strategy to the ESG Committee during a final workshop and support to the Pension Fund for its final internal validation round.
Throughout its effort to establish a sound climate strategy that serves as the basis for a more sustainable Pension Fund orientation, Sustainserv offered support in preparing the next steps, such as how to define additional concrete activities that uphold the climate strategy of the Pension Fund.
”Our Pension Fund is working continuously to further implement our sustainability and climate strategies, taking into account the individual characteristics of each asset class and respecting the longterm need of our beneficiaries for a save pension.”ESG Committee Pension Fund
The Pension Fund has now integrated the newly established climate strategy into its overall sustainability strategy as well as its business operations. While its aim is to increase transparency for its beneficiaries as well as its other stakeholders, the strategy also lays the foundation for further measures—a strategy that lasts. As is always the case, the strategy is a “living” stepping stone to be adapted whenever necessary to future events, regulations and/or reorientation of the company.
The Pension Fund published the resulting climate as well as sustainability strategies on its website (only in German) to provide its investors, clients and other relevant stakeholder groups with valuable guiding insights into its approach.