As part of the plans to lower the climate footprint from the investments, Industriens Pension is now introducing a new climate-related benchmark, which partly sets the direction for the foreign shares.
When the investment people behind Industriens Pension’s foreign shares have to measure their performance in the future, they will largely be assessed in relation to a completely new global climate-related share index. The new share benchmark has, among other things, focus on the companies’ climate transition, and this will in practice have a significant influence on Industriens Pension’s investments in foreign shares.
Industriens Pension currently has foreign listed shares worth almost DKK 60 billion. DKK. These investments will henceforth be measured partly against the newly established MSCI Climate Action Indexes and partly, as before, against the very broad index for global shares, MSCI ACWI.
By partially introducing a climate-related benchmark that, among other things, focuses on the companies’ restructuring process, Industriens Pension encourages the individual managers to focus even more on the companies’ transition and CO2 emissions. In practice, the benchmark that is measured against typically functions as a kind of framework for the investments.
“The new benchmark fits very well with our wishes to not only go after investments in sectors with low CO2 emissions, but also to focus on the difficult transition for companies with higher emissions. In this way, you can contribute to a real reduction of greenhouse gas emissions while at the same time that there is a full focus on creating good returns,” says Industriens Pension’s equity manager, Morten Rask Nymark.
A renewal of traditional ‘climate indices’
Historically, most traditional stock indices with climate profiles have focused on companies and sectors with the lowest CO2 emissions. The new MSCI Climate Action Indexes are based on both the individual companies’ current CO2 emissions as well as their goals and commitments to reduce emissions in the future.
“Investors are navigating an increasingly complex landscape when it comes to making investment decisions that both create sustainable value and protect returns. We are proud to see our innovative tools and solutions being used to help bridge these two goal,” says Axel Kilian, Managing Director, EMEA Client Coverage at MSCI.
In Industriens Pension, Morten Rask Nymark states that in practice a benchmark often functions as the investment universe from which the portfolio managers start when they invest. This is due, among other things, to ., that there will be a performance risk by selecting companies that fall far outside the benchmark
Related Article: Public vs. Private Climate Funds: Bridging the Gap for a Sustainable Future – MSCI Study
Significant role in plan for CO2 reductions
The use of the MSCI Climate Action Indexes as an overall benchmark will set the framework for the ongoing assessment of both the managers’ return performance and of the development in CO2 reduction from the investments.The index and the ongoing evaluation thus have a significant role in relation to Industriens Pension’s overall plan to lower the climate footprint from the investments.
As a member of the global investor network Net Zero Asset Owner Alliance, Industriens Pension has already formally committed itself that the entire investment portfolio must become CO2 neutral by 2050 at the latest.