Fonds de Compensation RESPONSIBLE INVESTMENT

FDC invests long-term and globally and is therefore committed to a healthy and sustainable economy. As an institutional fund manager, FDC is aware of its ecological, social and good governance responsibilities. Such considerations are taken into account in FDC’s investment strategy as well as in its investment decisions.

While the consideration of sustainable criteria has gained considerable momentum especially in recent years, FDC started formalising a responsible investor policy as early as 2010. At the beginning of 2011, the Board of Directors decided to set up and implement an exclusion list based on international conventions ratified by the Grand Duchy of Luxembourg and covering the areas of environment as well as institutional, social and joint responsibility. In addition to the restrictions imposed by the legal provisions and international conventions in force, FDC considers thematic or sectoral exclusions require a change in the legal framework applicable to the FDC.

At the same time, FDC has proactively started to pay more attention to sustainable criteria and aspects in its public tenders for mandating external fund managers. In 2012 the first mandate with an investment approach based exclusively on ESG criteria was awarded. Since then, FDC's responsible investor policy has continuously evolved and deepened.

At the end of 2019, the Board of Directors took the initiative to prepare a dedicated report detailing the scope, various aspects and implementation of FDC's responsible investor policy. Aware of the importance of environmental and social targets and objectives and in line with FDC's fiduciary duty, the given report also included a detailed climate analysis of FDC’s portfolios.

With the first sustainable investor report published in 2020, FDC aimed to provide a transparent inventory and to publicly confirm its commitment as a responsible investor. During 2021 and on the basis of this report, FDC has completed its responsible investor policy by launching a specific indexed sub-fund aligned with the Paris Agreement among other measures. It was also decided to publish the carbon footprint of its portfolio on an annual basis. Furthermore, FDC will publish, on a three-year basis and starting with the data as of 31^st December 2023, its transition trajectory in order to assess its compatibility with the Paris Agreement.

In 2022, FDC thus published its Sustainable Investor Factsheet 2021. This report is the first annual report showing FDC’s carbon footprint, while highlighting the key elements of its responsible investor policy in relation to the year 2021.

Beginning 2023, FDC approved its investment strategy for the years 2023 to 2027. In this context, FDC's responsible investor policy was further strengthened by broadening the criteria applicable for company exclusions, adopting an engagement policy towards the largest greenhouse gas emitters and increasing dedicated positive impact investments.

Conscious of the constant evolvement of responsible investing, FDC will continuously monitor developments in the field of sustainability and adapt its responsible investor policy as necessary.

Implementation of an exclusion policy

Since 2011, FDC has ensured that all its investments through its SICAV comply with international conventions. More precisely, the integration of such a principle is actually implemented through normative exclusions of companies that do not comply with international standards as enshrined in the ten principles of the United Nations Global Compact covering human rights, the environment, international labour standards and the fight against corruption. Their complementary standards are the United Nations Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises as well as a large number of underlying conventions and treaties. Equally excluded are companies involved in activities related to controversial weapons.

In addition to the excluded non-compliant companies, some companies are under observation. This status is in principle granted to companies for which investigations are not yet completed or for which engagement is still ongoing in order to put an end to the litigious facts. Depending on the progress of these investigations and discussions, these companies can be classified as either compliant or non-compliant. Whilst FDC supports in this way with its financial weight an engagement process led by its screening service provider with the aim to change the policy and governance mode of the companies in question, decision was taken to exclude companies deemed to have "extended under observation" status with no concrete prospects of improvement. 

Consideration of sustainable aspects and criteria

The assets invested through the SICAV are managed by professional fund managers approved and duly appointed by FDC. Since 2011, the questionnaire for the selection of fund managers includes detailed questions on sustainable aspects and criteria taken into account by the tendering companies, particularly in relation to their investment process and asset allocation. This aspect has been strengthened over time so that from 2017 onwards, each tendering company participating in a tender for actively managed mandates is obliged to integrate a sustainable approach into the investment strategy proposed to FDC. As a result, all FDC’s fund managers have engagement policies in place, participate in various initiatives and are members of various organisations that promote, among others, sustainability and/or the transition to a low-carbon economy, are all signatories to the United Nations Principles for Responsible Investment and strive to align with the 17 Sustainable Development Goals of the United Nations.

Although the specifically implemented sustainable approaches may vary, FDC endeavours to implement overarching criteria such as the LuxFLAG label eligibility criteria as well as the article 8 or 9 classification criteria of the SFDR regulation. In this way, the fund managers’ sustainable approaches are monitored and audited.

Dedicated positive impact investments

FDC makes dedicated positive impact investments in various forms. Dedicated sub-funds were created within the SICAV to invest in green bonds as well as in shares of companies that intend to generate environmental or social impact, in addition to financial returns. Also, indexed sub-funds dedicated to investments that are in accordance with the Paris Agreement objective to limit global warming to well below 2°C, ideally 1.5°C were launched. Finally, a tender has been launched foreseeing infrastructure investments primarily in clean energy and related sectors, as well as infrastructure investments in other sectors determined to be sustainable and environmentally friendly.

In this way, FDC contributes, for example, to the treatment and saving of water, the generation of renewable energy, the reduction of greenhouse gas emissions and the recycling and management of waste.

Through its stakes in the National Low-Cost Housing Administration and specific real estate acquisitions, FDC supports affordable housing.

As the owner of almost 700 hectares of forest labelled PEFC, FDC contributes to the absorption of CO₂ emissions, among other things.

Climate analyses and inherent risk monitoring

On an individual basis, detailed analysis and assessment of climate risks are carried out by FDC's fund managers. The management of these risks forms an integral part of their investment process. At the same time, the use of external service providers or tools allows FDC to have a more consolidated and independent view of climate risks and appropriate means to monitor and assess them. In addition, an alignment to a global warming limited to 2°C can thus be analysed.

FDC's Sustainable Investor Report 2024 shows the results of the latest climate analyses done by the FDC. FDC’s Sustainable Investor Factsheets summarise FDC’s annual carbon footprint assessment.

Implementation of an engagement policy

FDC’s responsible investor policy puts particular emphasis on engagement, especially with regard to environmental issues and greenhouse gas emissions.

In this context, FDC has defined and implemented an engagement policy put, among others, into practice through a membership of the Institutional Investors Group on Climate Change (IIGCC) and by being signatory to the Climate Action 100+ initiative as a supporting asset owner.

High energy and environmental performance standards

With regard to FDC’s direct real estate, high standards in terms of energy efficiency and sustainability are targeted and ensured in particular through high-level BREEAM labels.