Action Solidarité Tiers Monde (ASTM) and Greenpeace Luxembourg commissioned Nextra Consulting to analyse the 2020 investments of the Fonds de compensation commun au régime général de pension (FDC) in terms of sustainability. The FDC stated previously to be “aware of its ecological, social and good governance responsibilities” as an institutional asset manager. However, the analysis conducted by Nextra Consulting reveals that the FDC’s strategy is unambitious, insufficient, and non-transparent. In the course of 2022, the FDC will revise its investment strategy for the period 2023-2028 – a unique opportunity to significantly improve its sustainability performance. In this context, ASTM and Greenpeace propose concrete steps in terms of governance, investment strategy, divestment, and government action to advance Luxembourg’s sovereign pension fund on its path to becoming aligned with the Paris Agreement and respectful of human rights.

The FDC – a public institution of a country that has ratified the Paris Agreement – continues to invest citizen’s money in the fossil fuel industry. The FDC’s 2020 investments are associated with a potential temperature increase of 2.7°C by 2050, with two sub-funds even heading for a 6°C emissions pathway...

The FDC and its mandated asset managers fail to consider human rights in their sustainability approach and in their investment decisions. While the FDC often refers to its exclusion list to demonstrate its commitment to sustainability, this mechanism is not only non-transparent, but also insufficient. The Nextra analysis found that within the FDC’s actively managed portfolio, there are 282 reported cases by 196 companies of failures to conduct human rights due diligence. The financial sector is particularly concerned, as 30 out of these 196 companies are banks...

For the FDC to be sustainable, it must adopt and implement a global, coherent, and ambitious investment strategy for the fund as a whole, as well as for asset managers and their mandated sub-funds (both actively and passively managed). All investments must be aligned with the objective of the Paris Agreement of limiting global warming to 1,5°C as well as the International Bill of Human Rights.

The full analysis conducted by Nextra Consulting is available here.