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Six ways the UN Pension Fund is leading the way on sustainable investing 

23 January 2024

The UN Pension Fund is committed to sustainable investing. Our main strive is to avoid risks that may compromise the long-term economic value of the portfolio while capturing investment opportunities. The Fund seeks to attain its objectives through a four-pillar framework, detailed in the Fund’s Sustainable Investing Policy.  

  1. We do not invest in weapons and tobacco  

While we favour stewardship over exclusion to seek real-world impacts, the Fund implements investment restrictions in some industries which have negative consequences for our planet, the health and wellbeing of people.  

Since the creation of the UN Pension Fund in 1948, the Fund excludes investments in conventional and unconventional weapons – which play a critical role in preventing and ending crises and armed conflict. Since 1960, the Fund excludes investments in tobacco. The Fund also uses custom benchmarks to adjust its monitoring and performance analysis.  

More recently, the Fund signed the Tobacco-free portfolios pledge at its launch in 2018, cementing its longstanding commitment to excluding tobacco securities from its investments. 

  1. We are committed to net-zero emissions in our portfolio 

The Fund recognizes the urgency of the climate crisis and the need to take bold action to mitigate its impact. In 2020, the Fund joined the UN-convened Net-Zero Asset Owner Alliance (NZAOA), committed to transition its portfolio to net-zero greenhouse gas (GHG) emissions by 2050 and 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. The Fund believes its objective of ensuring the long-term sustainability of its investments is no longer compatible with investing in fossil fuels.  

The Fund excludes: 

  • 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 

As a result of its ambitious targets, the Fund successfully achieved its pledge to reduce the absolute greenhouse gases (GHG) footprint of its equities and corporate bonds portfolios by 39% in 2022 compared to 2019 levels. The Fund’s 2030 target is to achieve between a 40% and 60% reduction compared to 2019 levels, as per the guidance of the NZAOA. 

  1. We are committed to addressing natural capital and biodiversity challenges 

In addition to the previously mentioned initiatives, the Fund participates in Climate Investor networks, namely, Ceres Investor Network and Climate Action 100+ since 2019. Through these networks, the Fund can collaboratively drive change for polluting companies. More recently, in 2023, the Fund joined the FAIRR Initiative, a collaborative investor network that raises awareness of the material environmental, social and governance (ESG) risks and opportunities caused by intensive animal production. Following the signature of the UN biodiversity Conference (COP 15) Statement from the financial sector in 2022, the Fund also became an investor participant of Nature Action 100, the first global investor engagement initiative to address the urgent crisis of nature and biodiversity loss around the world.   

  1. We actively engage with companies to influence the way they conduct their business 

The Fund is an active steward of its investments, and the active ownership strategy is aligned with the rest of its sustainable commitments. By engaging with companies and exercising our voting rights as a shareholder, the Fund aims to promote good governance, social responsibility, and environmental sustainability that are important to its participants and beneficiaries.  

In 2022 alone, our service provider Federated Hermes EOS engaged on our behalf with a total of 581 companies globally on 2,507 issues and objectives. We also voted at 1,032 meetings on a total of 12,962 proposals.  

The Fund also targeted 81 companies with specific climate engagement programs in 2022. Engagement topics included setting GHG reduction targets in line with the Paris Agreement and adopting Science Based Targets. More information on these engagements and our progress can be found in the latest Task Force on Climate-related Financial Disclosures (TCFD) report

  1. We model climate risks in our portfolio to anticipate global changes  

Climate change is having a profound impact on pension plans worldwide which affects the performance and sustainability of pension plans. To further integrate climate analysis in our investment portfolios over the short, medium, and long term, the Fund assessed its exposure to climate risks across multiple scenarios in its Asset-Liability Management (ALM) study in 2023.  

The Fund designed the optimal asset allocation in the context of a climate scenario that aims for global carbon neutrality by 2050 and is aligned with a 1.5°C average temperature increase by 2100. This scenario assumes divestments to align the investment portfolios to the Paris Agreement, which would have disruptive effects on financial markets including abrupt repricing followed by stranded assets

  1. We are part of the Investor Advisory Group of the IFRS Foundation’s International Sustainability Standards Board (ISSB) to improve sustainability disclosure 

As part of the UN family, the Fund is contributing to the development of sustainability financial reporting. We will share our experience as a sustainable investor and advise on investors’ expectations and requirements on sustainability and climate reporting. In order to set the adequate tone for other asset owners and other reporting entities, the Fund will be reporting under IFRS S1 and S2, two standards for general and climate sustainability-related disclosures. 

To find out more about the Fund’s sustainable investing efforts, please visit: 

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