ATP Real Estate was familiar with the tenant from its previous investments and looking forward to continuing that co-operation, he said.Magasin is part of the UK-listed Debenhams retail group.Torben Möger Pedersen, chief executive of labour-market fund PensionDanmark, said the investment was part of a strategy to invest in commercial properties on prime locations with solid tenants and long leases.“The members can look forward to good returns on the investment, which is in accordance with our plan to have approximately 10% of PensionDanmark’s assets allocated to real estate,” he said.The property itself dates back to 1677, but has since been developed and renovated.The Magasin department store has been operating in the property since 1870.ATP Real Estate will administer the property, as it does for the other three Magasin properties owned by the investors.The parties did not disclose the price of the deal.In other news, pensions company Unipension said its new property strategy to shift bricks-and-mortar assets into global funds was on track, with 14 properties having been provisionally sold for a total of DKK1.28bn (€171m)Unipension, which runs three professional pension funds in Denmark, announced a change of strategy in March 2013 for real estate.It planned to sell its direct property holdings — mostly Danish residential and commercial buildings – and invest instead in global equities funds, starting with Europe and the US.The new strategy is aimed at achieving a higher long-term return and better spread of risk.Real estate allocations in all three pension funds will be brought to a level of 5%.Before the switch, the Architects’ pension fund had 11% of assets in property, MP Pension had 6% and the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD) had 1%.Unipension said it had set up a common fund for the three pension funds to hold the Danish properties, called Unipension Ejendomme, which was being managed by property company DEAS.The fund had taken over seven well-located core properties in and around Copenhagen that had previously been owned by MP Pension.“The work to implement the real estate strategy is going according to plan, and there is generally a good level of interest from potential buyers, and we have obtained sales prices above valuations,” Unipension said.Interest has been particularly strong for residential properties and centrally located commercial buildings, it said. Danish pension funds ATP and PensionDanmarkhave joined forces to buy the historic building in central Copenhagen that houses the Magasin department store.In the deal, PensionDanmark and ATP’s property arm ATP Real Estate bought the property on Kongens Nytorv in the Danish capital from Solstra Investments, with each pension fund taking a 50% stake.The two investors already own the three Magasin properties in Lyngby, Odense and Aarhus, and described the Copenhagen deal as a natural continuation of their current activities.Michael Nielsen, chief executive of ATP Real Estate, said: “We are very content with this investment, which is perfectly in line with our focus on large investments, long leases and secure returns.”
But because there were no strong market movements over the course of the year – unlike volatility seen in past years – no opportunity presented itself for Etera to add value by investing tactically, he said.Puhakka added that, as a result of the weak overall return, Etera amended its investment strategy and would now place greater emphasis on the optimisation of its strategic asset allocation rather than relying on tactical investments.Assets under management at Etera fell to €5.51bn at the end of 2013, down from €5.7bn in December the year prior and the lowest level since March 2012.Correspondingly, the provider’s solvency ratio continued its year-long decline from 21.3% to 15.2%, the lowest level since September 2011 – after it announced nine-month investment returns of -5.2%.Etera’s results are behind other mutuals, including Veritas Pension Insurance, which returned 7.4% on investments in 2013, aided largely by a 18.3% return on its equity holdings.Although the insurer’s head of investments Niina Bergring noted that fixed income holdings returned a more “moderate” 1.5%, real estate investments grew by nearly 6%.Veritas saw its solvency ratio increase by nearly 4 percentage points year on year to 27.8%, and said it had achieved a real return of 5.1% over the past five years. Finland’s Etera has seen assets under management dip to their lowest level in nearly two years after the pensions mutual admitted to “disappointing” returns of just 0.3% from investments, down from nearly 10% in 2012.According to preliminary results, Etera’s equity and fixed income returns were “weak”, although it did not disclose how the two asset classes fared.Chief executive Hannu Tarkkonen said its investment strategy did not work in 2013 and blamed the investment climate.Jari Puhakka, the provider’s CIO, noted that equities were the dominant force for growth in 2013.
“Fluctuations in the funding ratio are normal and, in light of the long-term nature of occupational pension provision, should not be a reason for concern.”According to the consultancy’s German Pension Finance Watch, the fall in the average discount rate also resulted in an 11.1% increase in liabilities to €336.8bn among the 30 DAX companies, compared with €206.6bn in assets – up by 4.3% over the first half of the year.The growth in assets was largely due to an overall asset return of 5.5%, attributed to growth in European and global equity holdings.Fixed income holdings returned 6%, with only real estate portfolios making a loss (-0.8%).The trend was mirrored across MDAX firms, where liabilities rose by 11.2%, while assets under management increased by 4.1% to €27bn. Funding at some of Germany’s largest pension funds has fallen by as much as 4 percentage points over the first half of 2014, as schemes continue to struggle with the low interest rate environment.Consultancy Towers Watson estimated that pension funds for companies within the DAX index saw coverage fall to 61.3% as of the end of June, down 4 percentage points compared with 2013.The funds of the 50 companies within the MDAX saw a similar decline, down by more than 3 percentage points to just 48.1%.Head of retirement solutions Thomas Jasper said the decline was due to the falling discount rate, now at an average of 3.07% compared with 3,65% at the end of 2014.
In August last year, France became the first country to introduce mandatory climate change-related reporting for institutional investors. The relevant law has been hailed as “groundbreaking”, with potentially far-reaching implications. Many investors, in the meantime, have their work cut out for them.The reporting obligations are set out under Article 173 of France’s law on “energy transition for green growth”, with an implementing decree setting out the requirements in greater detail. Effective since the beginning of January, the decree applies to a wide range of investors, including asset managers, insurance companies, Caisse des Dépôts et Consignations and pension and social security funds.They are being required to report not only on how they integrate environmental, social and governance (ESG) factors in general into their investment policies – and, where applicable, risk management – but also specifically on how climate change considerations are incorporated.The law makes France the first country to introduce mandatory carbon reporting by investors, according to Trucost. Although several large asset owners already disclose their carbon footprint and/or report on their responsible investment strategy, this is either of their own volition or as part of a wider initiative or code.The Swedish government has threatened to pass legislation to force the country’s commercial pensions and investment sector to report carbon footprints, but no decision has been made on this. Also, the focus of this particular push in Sweden appears to be different from the French initiative, being pitched in terms of transparency for customers rather than as part of a high-level public policy drive to cap climate warming.The French requirement, according to the European Sustainable Investment Forum (Eurosif), is “a groundbreaking measure for the investment community” and “very good news” for responsible investment.Article 173 is ambitious on climate change, added Eurosif, being the first national regulation built around 2°C as the maximum tolerable global temperature increase. It also “mainstreams” ESG disclosure.The 2° Investing Initiative also believes the law has far-reaching significance.In an analysis published before the implementing decree was finalised, the association hailed the law as “a significant step forward for France and the global development on this topic”.The impact of Article 173, it said, “will be felt beyond France and contribute to international demand for climate-related non-financial data of companies”.Quantum leapIt is also very much being felt on the ground among French institutional investors, according to Benoît Magnier, chief executive at Cedrus Asset Management in Paris.He welcomed the law as a game-changer, saying it cemented climate change as a strategic matter for investors.But meeting its requirements will not be easy, he said, and the asset manager has already received plenty of “panic calls”.“The big insurers will have some work to do, but it’s not a real problem for them – it’s a challenge really for the medium-sized investors,” Magnier told IPE. “They’re the ones who have to start from scratch, understand the issues and invest resources to come to grips with it.”Philippe Desfossés, chief executive at ERAFP, the €23.5bn supplementary pension scheme for French civil servants, puts it somewhat more starkly.In his view, the requirements are “a quantum leap” for most investors.“We had been trying to convince the government to go for something more limited, to be able to move quickly,” he said.“But [it] took a different path and went for something more comprehensive and ambitious. It’s good because this puts pressure on those institutions that weren’t paying attention to this area. But I have some doubts about this leap to fully fledged disclosure when so many investors have not even measured their carbon footprint.”The nitty grittySpecific requirements under Article 173 and the implementing decree include requiring investors to disclose how they address climate change-related risks, split into “physical” and “transition” risks, and to assess and report on their contribution to international efforts to cap global warming and to supporting France’s “energy transition”.As part of these overarching requirements, investors should, inter alia, describe how they take into account aspects such as changes in the availability and price of natural resources, policy risk related to the implementation of international climate targets, and the soundness of capital expenditure for the development of fossil fuels.These and other disclosures are not required of smaller investors, namely entities with a total balance sheet or belonging to a group with a total balance sheet of less than €500m. These are only obliged to provide a general overview of how they integrate ESG factors.Investors have until the end of June 2017 to deliver the information required by the law.The government plans to review the implementation of the decree after two years of application, by the end of 2018.FIR, the French responsible investment forum, believes the government struck the right balance between imposing new responsibilities but also allowing for flexibility, and welcomed what it said was a pragmatic approach.Thierry Philipponnat, chairman at FIR, said there were two grounds for satisfaction.“Firstly,” he said, “[it is] an ambitious and pioneering law on the fight against climate change, and one recognised as such by the international responsible investment community.“Secondly, [it’s] an approach taken by the public authorities that allows for the development of good practice in a field where more work on methodology still needs to be done.”
Henk van der Meer, chair at Tandtechniek, the €693m pension fund for dental technicians, said the options for schemes seeking new providers would be limited.“Blue Sky Group doesn’t have experience with sector schemes,” he said. “We wonder whether AZL has sufficient capacity, and small provider AGH has taken on some large clients recently.”He said he also had reservations about TKP Pensioen’s service and MN preparedness.John Klijn, chairman at VLEP, a €2.2bn industry-wide scheme, said Syntrus Achmea’s proposed two-year transfer period was probably too short.“The company, however, has a responsibility to provide, so we assume it won’t just kick us out,” he said. Lahoye said Kappers feared it would face a significant problem soon, as Syntrus Achmea announced it would stop running the older IT system from 1 January 2018.The hairdresser scheme is still using the system, along with seven other industry-wide funds, as it lacked confidence in the new system, Lahoye said.Both Klijn and Lahoye said they had seen signs that Syntrus Achmea, even ahead of last week’s announcement, had been focusing increasingly on its subsidiary Centraal Beheer’s new general pension fund (APF).Lahoye said he had been surprised by the provider’s decision on industry-wide schemes, “as its director Tom van der Spek had reassured us only three weeks ago that there would be continuity”.The chairs of Tandtechniek and VLEP said their schemes had complaints about Syntrus Achmea’s service, but Lahoye said Kappers had been satisfied and prepared to renew its contract.VLEP’s chair Klijn emphasised that the provider had paid ample attention to problems.“We had the impression, however, that Syntrus Achmea could not always keep up with developments,” he said.The boards of VLEP and Kappers are to meet at short notice to discuss the way forward.Tandtechniek had already begun looking for a large merger partner after Syntrus Achmea made clear the pension fund was not profitable for the provider, its chairman said. The Dutch pension funds forced to find new pensions administrators following Syntrus Achmea’s shock decision to stop providing services to industry-wide schemes are concerned they now face serious obstacles in finding replacements.Several pension funds have lamented their poor negotiation positions, while others have expressed doubts that the market will be able to accommodate a significant number of large pension funds within a short space of time.Last week, Syntrus Achmea, after its new IT system failed to cope with the diversity of various pension plans, announced that it planned to transfer the last of its 15 remaining industry-wide pension funds by early 2019.René Lahoye, employee chair at Kappers, the €664m pension fund for hairdressers, said: “We now have to knock on the doors of other providers.”
The opposition Labor Party pushed for the inquiry, and after stonewalling for months, the government – led by prime minister Malcolm Turnbull – finally agreed to the Royal Commission inquiry last week, expanding its intended scope to include the superannuation sector.The industry has argued that there is little relation between the specific areas of concern about the banks and the superannuation system.The Royal Commission has specifically been asked to look at whether superannuation funds have used their members’ savings “for any purpose that does not meet community standards or expectations or is otherwise not in the best interests of members”.Conservative-leaning politicians have previously criticised the union-run industry super funds – which controlled AUD545bn in members savings at the end of August 2017 – because of their alleged financial support for the Labor Party and a perceived lack of transparency.The industry’s representative body, the Association of Superannuation Funds of Australia (ASFA), said it was disappointed that the government had included superannuation in the scope of the Royal Commission.A plethora of never-ending inquiries, reviews and regulation was at odds with maintaining a system that had served Australians tremendously well, the ASFA said.Research released by ASFA this week showed the pension funds were working well, with retirees having higher incomes and a smaller proportion of those aged over 65 relying solely on the state pension.An increasing number of retirees had significant private income above the state pension level, the ASFA said, with many more able to achieve a comfortable standard of living in retirement.“Superannuation fund members have access to redress in regard to any complaints against a fund, at no cost to the fund member,” the ASFA added.The association said the sector had been subject to numerous inquiries in recent years and was closely supervised by a variety of regulators.Peter Collins, chair of Industry Super Australia, a collaborative body, said that following a series of allegations and scandals within the banking system, the government’s decision to hold a Royal Commission into misconduct in the financial services industry was inevitable.Even as it announced that the superannuation sector was included in the inquiry, the government was still planning to bring in wide-reaching reforms to tackle hidden payments in union-controlled funds.However, this week, the sector scored a significant win when the government was forced to shelve the move to bring in further legislation, including forcing super funds to appoint independent board members.The Royal Commission on financial services will have 12 months to conduct the inquiry and the final report is expected in February 2019. Australia’s AUD2.5trn (€1.6trn) superannuation industry has been dragged into a controversial government inquiry into the country’s financial services sector.The decision by Australia’s government to include the superannuation industry in a Royal Commission inquiry caught the sector by surprise.The inquiry, to be headed by retired High Court judge Kenneth Hayne, was originally intended to look into the banking sector – specifically the conduct of the country’s leading banks.Some banks have been accused of rigging or manipulating the swap rate, while regulator Austrac earlier this year filed civil proceedings against the Commonwealth Bank of Australia, claiming it had breached money laundering rules.
A Scandinavian institutional investor has tendered a $100m-$200m (€81m-€162m) US equity mandate via IPE Quest.In the long-term the mandate would be for $400m, according to search QN-2420.The investor wants to invest via a UCITS fund, and has specified that the fund manager should be a signatory to the Principles for Responsible Investment.Its investment team should integrate environmental, social and governance (ESG) considerations in the investment process by doing “thorough ESG analysis on all holdings pre-investment”. The successful organisation should also vote shares and engage with management “to create positive change in terms of ESG”, it said.The investor has indicated it wants an “all-cap blend/core” strategy, or with a slight growth or value tilt.Investing should be “active, fundamentally-driven, bottom-up”. It has specified two indices, the Russell 3000 and the S&P 500.It has capped the tracking error at 6% and said the minimum tracking error should be 2%.Applicants should have at least $1bn of assets as a firm, and $200m for US equities. They should have a track record of at least six months in the strategy, although at least three years is preferred.Interested parties have until 19 March to apply, and should state performance to 31 December 2017, gross of fees. The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected]
Dutch civil service scheme ABP has made considerable progress in reducing carbon emissions from its investments, exceeding the target it had set for 2020.In its annual report about sustainable and responsible investment for 2017, the scheme said the emissions reduction amounted to 28% relative to 2014. It had initially aimed to reduce emissions by 25% by 2020.The €409bn pension fund attributed the decrease largely to deliberate choices on low carbon investments, but noted that it had been financially more attractive to invest in cleaner sectors, such as IT and financials, last year.This meant it was possible that that its carbon footprint could rise slightly again “if necessary for a proper return”, it warned. Last year, the pension fund increased its sustainable investments by €8bn to €50bn. It aims to add another €8bn by 2020.The increase included adding to its stake in green bonds by €2.1bn to €3.5bn. This included a €563m investment in French green bonds, aimed at expanding sustainable energy as well as dredging the river Seine, in order to reduce flood risk as a result of climate change.ABP has invested €23bn towards the UN’s target of making cities and communities sustainable. This included stakes in energy-efficient buildings and manufacturers of LED lights.It has also holdings in health and wellbeing companies and and clean, affordable energy providers, amounting to €9.6bn and €6.8bn, respectively.Last year, it increased its allocation to renewable energy by €1.2bn to €4bn, which is 80% of its target for 2020.The civil service scheme also increased its investments in education and communication technology by €500m to almost €2bn.ABP’s 2018 plansIt said it intended to make progress this year in classifying its current investment universe of 9,500 companies into frontrunners in responsible undertakings and laggards that are willing to improve.ABP added that the process would follow the UN Global Compact criteria for responsible undertaking, including human rights, employment rights, environmental issues and corruption.Of the 593 companies the pension fund assessed in 2017, 478 qualified as frontrunners. It decided that 22 of the 115 companies identified as stragglers had improvement potential.The civil service scheme said it had developed a new assessment framework for excluding investment in specific product categories, which had led to the exclusion of tobacco and nuclear arms.Part of the scheme’s engagement activities involved discussions with manufacturers about remuneration policies. In ABP’s opinion, weak remuneration policies had encouraged recent cases of malpractice relating to deceptive software.The pension fund also revealed that a survey of its participants had found that they considered the link with returns as the most important element of sustainable and responsible investment.
Source: CDAPieter Omtzigt, CDAHe argued that the ultimate pension benefits could be reduced by up to 30% as a consequence of excessively high costs.The Dutch parliament also demanded a qualitative analyses of the two new pension contracts that were being developed by a steering group of social partners and the government.The analyses must address the issues of “collectivity, solidarity, certainty for participants as well as an adequate compensation for all generations”, the motion stated.Owase pension fund to join consolidation vehicleDutch company pension fund Owase has decided to transfer its pensions arrangements to a general pension fund (APF).In its 2018 annual report, the board said joining the consolidation vehicle would bring the €857m scheme under independent professional trustees, with Owase getting a say through the APF’s stakeholder body.Owase, which serves 26 employers including its founder, tubing manufacturer Wavin, declined to provide details about the APF.The pension fund also serves Hardenberg-based Dion Pensioen Services, which provides Owase with administration services.When the scheme joins the consolidation vehicle, Dion will lose one of its larger clients, which also include the Dutch pension funds of CitiGroup, PepsiCo, British American Tobacco and Ford.Martin Lemmers, director of Dion Pensioen Services, said he expected to welcome new clients “as smaller pension funds in particular felt at home with a smaller pensions provider”.Owase, which has a collective DC plan, attributed its reported costs per participant of €573 to the ever stricter legal rules and regulation for pension funds. At the end of May, its coverage ratio stood at 118.9%. In Omtzigt’s opinion, the introduction of a new pensions contract was the right moment to set new rules to protect participants. The Dutch parliament has asked the cabinet for an independent external survey into the implementation costs of both the current and the envisaged new pensions systems.A large majority of members of the lower house backed the motion, which also called for guarantees for low costs.The motion was initiated by Pieter Omtzigt, MP for the Christian Democrat party CDA, who said he feared that the transition from the current collective pensions contract to an individual one would lead to a significant cost increase.He cited the “nightmare scenario of Australia”, where he claimed that pensions reform 10 years ago “has caused costs to increase fourfold”.
The Net-Zero Asset Owner Alliance (NZAOA) has issued a “call for comment” in a bid to spur the development of methodologies that would better support its members in pursuing their carbon neutrality goal.According to the group, no existing initiative currently fulfils enough of its methodological requirements for its members to converge on it.Investors in the Alliance have committed to reducing the greenhouse gas (GHG) emissions in their investment portfolios to net-zero by 2050, to be aligned with the Paris Agreement objective of limiting global warming to 1.5°C above pre-industrial levels.They seek to do this in particular by aiming to drive decarbonisation across sectors by engaging with companies and policymakers. Their commitment includes reporting regularly on their progress and establishing intermediate targets every five years. “In order for us to monitor progress and report against this 1.5°C target and feed this ambition into the COP26 process in close coordination with the UN Special Envoy for Climate Action and Finance as well as the TCFD secretariat, we express a need to develop robust measurement methodologies,” the group said in the call for comment document.The Task Force on Climate-related Financial Disclosures (TCFD) is considering how asset owners and managers could disclose information on the position of their investment portfolios relative to the transition to a net-zero carbon economy, and has created an ‘Implied Temperature Rise Associated with Investments’ working group that coordinates closely with the NZAOA.“While various solutions providing an ‘implied temperature rise’ metric already exist, more convergence is urgently needed”Net-Zero Asset Owner Alliance“While various solutions providing an ‘implied temperature rise’ metric already exist, more convergence is urgently needed,” said the NZAOA. “The NZAOA is not designed to develop such solutions.“Instead, this ‘Call for Comment’ defines the core methodology principles required and is launched in order to generate adequate methodology developments that will better suit our needs.”‘Demanding’ requirementsNZAOA described the requirements as “demanding,” saying its members recognised this and did not expect any provider to fill all the gaps, but considered them “a roadmap to highlight a trajectory over time”.The requirements include that the methodology should:favour reported data over inferred data;be based on documented and transparent principles so that the results produced by calculations can be replicated by other investors using the same databases;be based on GHG emissions footprinting including Scopes 1 and 2, and Scope 3 for sectors “where these are material”; andhave basic principles that are “simple to explain to non-specialist audiences while the full underlying methodology may remain complex”.Other requirements are that methodology provides investors with a metric that:is expressed in terms of a forward-looking carbon key performance indicators (KPI) as well as a “temperature KPI”; andmust be able to be expressed at individual issuer and portfolio levels (including multi-asset class portfolios).‘Preference’ for carbon intensity based on enterprise valueIn the call to comment the NZAOA also revealed its backing of at least one element of the approach to calculating carbon intensity that has been recommended by the EU sustainable finance technical expert group (TEG) for EU climate benchmark categories – and strongly criticised by Scientific Beta.The asset owner group said it had “a preference for footprint intensity normalisation rules based on enterprise value,” bringing up a point over which there was recently a clash between Scientific Beta and a member of the technical expert group (TEG).According to a spokesperson for the NZAOA’s monitoring reporting and verification working group, “the reason for our focus on enterprise value (EV) is to achieve some consistency with the EU climate transition and Paris-aligned benchmarks”.“EV was chosen over revenues because it creates less volatility in all the tests performed and shows less differences across sectors,” the spokesperson added. “In that way, it is better applicable to diversified strategies.”The NZAOA’s ’Call for Comment’ document can be viewed here.