Case Study: CAP Prévoyance

A public pension fund aligns its investments with long-term sustainability criteria.

Information on the organisation

Type of organisation Public pension fund. Occupational pension fund for the City of Geneva, SIG (Geneva’s industrial service provider), 41 Geneva municipalities, six external institutions, and CAP Prévoyance. Assets under management CHF4.1 billion (as of 31.12.2016)

Approximate asset allocaAllocation by asset class tion (as of 31.12.2016) CHF bonds: 5.7% Foreign currency bonds: 13% Swiss equities: 15.7% International equities: 20.3% Real estate: 33% Other: 12.3%

Information on sustainable investment policy

Who initiated the drafting CAP Prévoyance (“Caisse d’assurance du personnel de la Ville of a sustainable investment et des Services Industriels de Genève” until late 2013) has been policy? active in sustainable investment since 2001. Both the foundation’s Board of Trustees and the executive management support and carry forward the issue. What was the main motivaThe approach was mainly driven by the Board of Trustees, which tion for this step? felt that especially a public pension fund should be concerned about and evaluating issues of good corporate governance and sustainable development. In line with the values and principles set out by the City of Geneva, the Board and executive management expressed their intention to invest responsibly so as to finance a sustainable economy. Another reason was long-term vision. Board members are convinced that the incorporation of environmental, social, and corporate governance (ESG) factors is likely to increase the value of the capital on a risk-adjusted return basis. What are the main Broadly speaking, the 2010 adopted Responsible Investment components/content of Charter recommends: the sustainable investment • incorporating ESG issues into the management of movable policy? and immovable assets, • exercising voting rights and shareholder dialogue, • excluding companies involved in arms and pornography, and • that CAP does not invest in commodities and hedge funds.

How was the sustainable investment policy implemented?

What resources have been deployed for this?

What were your experiences with the policy implementation?

What were notable difficulties?

What do you consider to be the main benefits of your sustainable investment policy? As early as 2001, CAP Prévoyance decided to exercise its shareholders’ rights as extensively as possible and became a member of the Ethos Foundation. It strengthened this commitment in 2009 by joining the Ethos Engagement Pool, whilst at the same time gradually increasing its investments in Swiss and international sustainable equity funds. In 2010, the Responsible Investment Charter was drawn up and is now an integral part of the fund’s investment regulations and an important milestone in the formalisation of its commitment (www.cap-prevoyance.ch/la-fondation). This Charter must be enforced as part of a sound and rigorous financial framework, aiming to meet the financial interests (i.e., profitability of its investments) of CAP Prévoyance, in the long run. The content of the Charter was communicated to all external asset managers and presents responsible investment as a philosophy that can be applied to all assets. Expected returns are similar to those of traditional investments. The internal team is sensitive and open to issues of long-term sustainable development. To ensure that these issues are included in the investment process, CAP Prévoyance has decided to join the Ethos Engagement Pool and to work regularly with external advisors. It also relies on the asset managers to adjust their investment processes and provide innovative solutions that are compatible with the Charter. The approach has been well received by partners. This even includes the asset managers whose management solutions were not compatible with the Charter. As CAP Prévoyance is aware that applying the Charter to different asset classes (stocks, bonds, etc.) can lead to additional constraints and risks, it takes a pragmatic approach by applying the principles gradually and prudently. Recent results (2015) are considered sound with regards to developments in the financial markets and reference indices. The main impediment is still the current economic, financial, and regulatory environment, which poses numerous challenges that need to be addressed by pension funds if they are to ensure the longevity of their services. The major benefits are improved transparency and enhanced dialogue with external partners and companies as well as better risk management (for example, controversy monitoring).

This case study was produced with the support of Angela de Wolff, Founding Partner of Conser Invest.