By Muskan Arora
Switzerland’s
Caisse de prévoyance de l’Etat de Genève (CPEG) is delivering returns for beneficiaries
while keeping in place an impact investing viewpoint, said Gregoire Haenni, the
fund’s chief investment officer.
The CIO, who considers sustainability as the “backbone” of
CPEG’ s portfolio, has seen the pension plan’s assets under management grow from
$13bn to $25bn.
The pension plan returned 6.10% and 6.70% for its 1- and
3-year returns, beating its benchmarks 3.89% and 2.80%, respectively, as of
December 31, 2024.
Indeed, since 2024, CPEG has used Ethos Impact Inc.’s ESG
data rating tool to assess investment managers based on recommendations in several
ESG-aligned areas, including how managers vote on matters related to ESG.
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Haenni, in collaboration with Jérôme Spichiger, CPEG’s
financial expert, leverages MBS and Ethos to review manager votes based on recommendations
pulled from the Ethos tool and based on provisions in the Swiss Stewardship
code.
The Ethos tool has been useful in helping them to closely
examine impact investments on an international and domestic front, primarily in
the private placement asset class.
“These recommendations are linked to resolutions decided by
shareholders,” said Haenni, noting the plan engages in dialogue with the
managers when red flags arise.
The objective is to establish an ecosystem that includes all
stakeholders in the energy transition, such as the government, asset owners,
and local utility providers.
“The creation of an ecosystem and the syndication of
investors can lead to a replicable or organically growing model. This approach
is essential for delivering a significant impact on the environment.”
CPEG was the first Swiss pension fund to join the
Institutional Investors Group on Climate Change, Europe’s largest activist
group focused on climate, with EUR $60 trillion in aggregate assets. In 2024, the
plan also conducted one of the initial Asset-Liability Management (ALM) studies
to integrate environmental, social, and governance (ESG) criteria at the asset
class level.
“This represents a significant milestone for CPEG.
Currently, the comprehensive investment strategy includes ESG criteria, from
the formulation of the strategic asset allocation to the adoption of
norms-based and exclusionary strategies.”
Additionally, the plan has started working toward investing in
green and blue bonds within its fixed income portfolio and is currently
studying how the asset class behaves and the main drivers of these strategies
historically.
While the recent environment has negatively affected bonds
and equities, he expects episodes of positive correlation in the coming years. Both
have performed well within CPEG’s portfolio, he said. When it comes to
equities, Haenni tends to lean more toward a passive strategy within his portfolio,
noting since the pandemic innovations have stemmed mainly from the
pharmaceutical, technology and automobile sectors.
“If you’re invested in a passive strategy or solution, then
you’re exposed to those innovations. When you have only a few stocks driving
the index, then you’re exposed to it.”
To understand the sources of returns, Haenni has undertaken
a fundamental performance study, especially for the fund’s equities portfolio
wherein two factors including valuations and fundamental performance are being
considered.
“That is fascinating because what this shows is that you
should focus on the fundamental performance of your asset classes rather than
the valuation component, which is very speculative,”
“The valuation change is volatile and it’s very
speculative,” said the CIO.
“Most of the performance, which is the blue line, is driven
by the fundamental performance. I think this is so interesting because we’d
like to now move this to the next level and maybe incorporate that in our
portfolio analysis,” he added.
