With a portfolio of more than €22b, the Fonds de Compensation (FDC)--Luxembourg’s public sector pension fund--continues investing in fossil fuel but also nuclear energy, mining companies and tobacco.
“The FDC’s investment strategy can be rated as ‘unsatisfactory’ from a sustainability perspective,” said German economist Martin Granzow in a Q&A published by Greenpeace.
The fund in 2018 adopted a socially responsible investment strategy and does not invest in 126 companies blacklisted for controversial weapons activity, and environmental, human rights and business ethics abuses.
But the strategy is not far-reaching enough, Greenpeace insists. The environmental campaign group last year took the environment ministry to court over failing to reveal the financial risks linked to its carbon assets.
“Business models based on fossil fuels will be phased out,” Granzow said, citing a study by insurer AXA estimating that annual returns of oil and gas companies are expected to fall by 40% over the next decade.
The FDC has pledged to provide an analysis of the climate risks linked to its investments before the end of this year but has also said that a change in legislation would be needed to ban carbon investments. Under its current statutes, the fund cannot exclude an entire branch of industry based on environmental criteria.
Change without delay
“We call on politicians to send a clear signal without delay that the integration of sustainability risks is an essential part of the FDC’s mandate,” a report commissioned by Greenpeace said.
Carried out by German consulting agency Nextra, the report urged the fund to be more transparent on its sustainability performance and align its portfolio with the Paris climate targets.
Luxembourg in October 2018 launched a sustainable finance roadmap for the country’s financial services sector and the grand duchy this month became the first European country to launch a sustainability bond framework.
But, according to Greenpace, the FDC increased carbon investments by 60% between 2015 and 2019 to reach half a billion euros.
Leftist party déi Lénk has led a charge against the FDC in parliament, tabling motions in 2019 and 2020 to overhaul the fund’s investment portfolio. Both initiatives were voted down by the coalition parties.