On 4 July, the CSL (Chambre des salariés or ‘chamber of employees’) issued a public statement pointing out the way the Fonds de compensation (FDC) manages its financial investments in Luxembourg, like the funds it has at its disposal. The CSL posted a resolution calling on the government to review the legal framework and missions of the FDC. It also asks for "a political discussion to achieve a paradigm shift in the use of the general pension scheme reserve".
The CSL argues that when the FDC was created in 2004, it coincided with the creation of the so-called Kyoto Special Fund. This special fund was built around the EU Emissions Trading Scheme (ETS) to combat climate change, and was later integrated into the Paris Agreement at COP21.
"However, the FDC's investment strategy has so far been marked by a certain inertia in the face of the extreme climate emergency (...) The FDC is positioning itself in severe contradiction with the joint efforts of the Luxembourg government and its citizens,” the CSL says. The press release calls for efforts to combat global warming to be accompanied by a more rigorous and virtuous management of investments, particularly with regard to ESG, but also to social and human rights, including access to affordable housing. Greenpeace and the NGO Action Solidarité Troisième Monde last March had directed similar criticism at the FDC.
More sustainable investments and more synergies
This is why the CSL is demanding that "the selection criteria for the investments made be defined much more restrictively and that appropriate benchmarks be used to verify the overall performance of the FDC". The €23bn held by the FDC at the end of 2020 represents 43% of total government financial assets and is equivalent to what the central government will have invested in the public sector between 2010 and 2022.
The current level of the reserve amounts to 4.8 times the annual benefit expenditure, but could be exhausted in 2043, according to the latest official projections. The strategy for the sustainability of the pension scheme must, according to the statement, be revised to better support ecological and social transition. "In the long term, the FDC will therefore never be able to succeed in its main mission of 'ensuring the sustainability of the general pension scheme',” according to the chamber.
Furthermore, the CSL proposes the creation of synergies between the FDC and the Société nationale de crédit et d'investissement (SNCI) to meet the annual public investment needs required for the ecological transition in Luxembourg. It also notes that greater financial synergies between border countries could strengthen the employment and living environment on which Luxembourg remains dependent.
This story was first published in French on . It has been translated and edited for Delano.