Fonds de Compensation RESPONSIBLE INVESTMENT
As an institutional fund manager, FDC is aware of its ecological, social and good governance responsibilities. In 2010, FDC integrated a responsible investor policy. Since then, FDC's responsible investor policy has been evolving.
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.
The Paris Agreement on climate change, the 2030 Agenda for Sustainable Development of the United Nations or the 2030 Climate and Energy Policy Framework of the European Commission include environmental and social targets as well as objectives that will have an impact on the entire financial sector. Aware of the importance of these issues and in line with its 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 31st 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.
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.
The pillars of FDC's responsible investor policy
Implementation of an exclusion list
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 a normative exclusion 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. Thus, with its financial weight, FDC supports an engagement process led by its screening service provider with the aim to change the policy and governance mode of the companies in question. Almost 180 companies are currently under observation.
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.
Currently, twelve ESG or Environment labels have been awarded by the labelling agency LuxFLAG. With regard to the SFDR regulation, eleven sustainable approaches are article 8 compliant, meaning that they promote environmental and/or social characteristics as well as good governance practices. Furthermore, three sustainable approaches are article 9 compliant, meaning that they have sustainable investment as their objective.
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. At the end of 2021, nearly 685 million euros were invested in these sub-funds. 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.
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.
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 responsible investor report 2020 shows the results of the latest climate analyses done by the FDC.