Pension funds have put around 60 billion Swiss francs into companies that are partly responsible for the deforestation with their production processes, supply chains, products, and services, according to a Greenpeace report published Wednesday.

Preserving forests is key to keeping global warming levels to 1.5°C above pre-industrial levels by 2050, as 196 members agreed on in the 2015 Paris Agreement. But Swiss pension funds are not taking enough responsibility to ensure that the transition to a net-zero economy takes place, the non-governmental organization says.

Matter of Time

The Swiss association of pension funds (ASIP) disagrees, writing in a response to finews.com that pension funds increasingly take environmental, social and corporate governance (ESG)  criteria into account of their own accord. This is ultimately, «also in the long-term interest of policyholders, without (them) having to accept any loss of return,» a representative from the organization said. 

«Pension funds are well aware of their ethical, environmental and social responsibilities,» and it is only « a matter of time before all pension funds will have solved the problem raised by Greenpeace,» the association added. 

Employer's Choice

In Switzerland, companies choose a pension fund to which they pay contributions directly for each employee on a monthly basis. Currently, there are around 1,500 pension funds for occupational pension provisions (referred to as the «second pillar»).

Each pension fund is individually responsible for incorporating ESG criteria into its investment process.

Around 4.4 million people were holders of a compulsory pension fund at the end of 2020. At the end of 2021, the total value of assets held by Swiss pension funds was at least 1,222 billion Swiss francs, of which over 700 billion francs - or 60 percent - were invested in equity and bond markets, according to the report.

Funding the Transition

While some large pension funds hire sustainability experts to help them align their investment strategy with ESG requirements, smaller funds often cannot afford to do so and limit themselves to buying ESG products from large financial institutions or to boycotting certain companies which still generate high Co2 emissions. 

Some argue that by excluding these companies from their investment mix, they are missing out on contributing to companies that are driving the transition to a low-carbon economy.