Exclusions

While we favour stewardship over exclusion to seek real-world impacts, the Office of Investment Management has implemented investment restrictions in some industries as disregard for material ESG risks has negative consequences for our planet, the health and wellbeing of people.

Exclusions apply to both equity and fixed income, internal and external portfolios and the Fund created custom benchmarks to adjust its monitoring and performance analysis.

As of the end of March 2024, the Office of Investment Management excludes over 700 securities from its investment universe, across public equities and bonds. The cumulative return of the public equities customized benchmark, since June 1, 2022, was 25.8%, while the corresponding plain MSCI benchmark’s return was 24.6% (Equities account for 44.4% of the total fund). For the fixed income credit portfolio customized benchmark, the cumulative return was 9.8% while the plain Bloomberg benchmark’s return was 10% since October 3, 2022. (Corporate and government-related bond portfolio represents 10.6% of the total fund). The return of the customized ESG benchmark of the new High Yield Fixed Income portfolio was 1.1% since February 29, 2024. While that of the plain Bloomberg index was 1.2% (High Yield portfolio accounts for 1.9% of the total fund).

Armed violence hampers peace and sustainable development worldwide, threatening the rights and safety of individuals and communities. When social, commercial, infrastructural, educational, and healthcare facilities are damaged, the effects have a long-term impact. The negative externalities of the defence industry on society and the planet should not be minimized.

The Fund’s weapons exclusion is aligned with the Secretary-General’s Agenda for Disarmament launched in 2018, which pointed out four key areas along which disarmament helps achieve sustainable peace and development:

DISARMAMENT TO SAVE HUMANITY

Reduce and eliminate weapons of mass destruction

DISARMAMENT THAT SAVES LIVES

Reduce and mitigate the impact of conventional weapons

DISARMAMENT FOR FUTURE GENERATIONS

Remain vigilant regarding new and emerging weapon technologies

STRENGTHENING PARTNERSHIPS FOR DISARMAMENT

Partner with Governments, experts, civil society, women and youth

These exclusions apply to all companies manufacturing or involved in:

Chemical and biological weapons
Cluster munitions
Depleted uranium weapons
Landmines
Nuclear weapons
Conventional and unconventional weapons
Weapons systems

The World Health Organization (WHO) estimates the tobacco industry costs the world more than eight million human lives every year. While the negative implication of tobacco are widely recognized, the agency also reports the negative consequences of tobacco on the environment. In addition to the human costs, an estimated 600 million trees, 200,000 hectares of land, 22 billion tonnes of water and 84 million tonnes of CO2 are used in the production of tobacco every year.

Most of the environmental cost falls on low-and-middle-income countries, where water and farmland are used to grow tobacco plants, instead of for food production, which is often desperately needed.

In accordance with the WHO Framework Convention on Tobacco Control, the Fund excludes any investments in:

All companies producing tobacco
Companies deriving more than 15% of revenue from tobacco products (distribution, retail, supply chain)

In 2018, OIM signed the Tobacco-free portfolios pledge, cementing our commitment to excluding tobacco securities from our investments.

In his latest statement on the Intergovernmental Panel on Climate Change (IPCC) report, Secretary-General, António Guterres, called for an urgent transition to renewable energy and vastly scaled up investments in adapting and building resilience to the worsening climate impacts.

As a member of the Net-Zero Asset Owner Alliance (NZAOA), the Fund has committed to transition its portfolio to net-zero GHG emissions by 2050 to align with a 1.5°C global temperature increase scenario. According to the International Energy Agency (IEA), to meet this target and to align with the Paris Agreement, there should be no investment in new fossil fuel supply projects nor in new coal plants. Given the strong pressure from policymakers and the civil society regarding climate change risks and greater support from corporates globally, fossil fuels are becoming stranded assets, with greatly diminished long-term value. Therefore, the objective of ensuring the long-term sustainability of the UN Pension Fund investments is no longer compatible with investing in fossil fuels.

The Fund’s exclusions apply to:

Any company that derives more than 1% of its revenues from thermal coal
Any company that derives more than 10% of its revenues from fossil fuels

Fossil fuel companies that have started shifting their business models toward a low carbon economy and that plan to continue this path to reach international agreements such as the Paris Agreement are considered as investable transitioning companies.