CERN to include climate risks in investment strategy and up allocations

The CERN Pension Fund, the retirement scheme for the European Organization for Nuclear Research, plans to start including climate risks into its global investment risk management strategy. 

It has also expressed the intention to start increasing climate-focused capital allocations, according to fund's latest financial records, as studied by Net Zero Investor.

The Switzerland-based pension, which has around 3,700 members and is responsible for paying the pensions of around 3,600 beneficiaries based in 48 countries, said in its 2022 financial statement that it recently completed a climate impact analysis, as well as a transition pathway and carbon footprint study.

"Over the reporting period the Fund completed exploratory studies with the objective of providing an initial evaluation of the Fund’s climate risk," it wrote in its report.

Based on those results, the CHF 4.6bn pension wrote that "the Fund is on a path of progressively integrating the management of climate risks into its global investment risk management framework. While the responsibility for this integration lies within the remit of the CEO and the CIO, the progress is continuously monitored by the Investment Committee."

Allocations

In addition, the CERN Pension Fund, which was launched in 1955, said it also plans to allocate more and fresh capital to climate-related investments.

"The Fund is active in identifying opportunities to invest in climate transition themes," the report stated.

"This combination of bottom-up and top-down approaches is deemed to be appropriate, given the complexity of the matter and the inherent uncertainties."

CERN has invested in two infrastructure investment vehicles that aim to accelerate the energy transition: one fund that focuses on energy transition solutions and another vehicle that invests in offshore wind energy in Scandinavia.

It has also dedicated capital to a credit fund that provides bridge financing for energy transition and in three private equity funds that invest exclusively in companies deemed to have sustainable and renewable infrastructure, according to the financial report.

The CERN Pension Fund confirmed it has also made investments in timber, both through direct ownership and through investment funds.

Looking ahead

The pension warned that two climate scenarios in particular could severely impact the fund.

Based on the studies, which looked at CERN's asset allocations over the long term under different climate scenarios, a 'disorderly transition', as the CERN put it, would leave the pension fund extremely vulnerable and expose its investment portfolio to such risks that its cumulative returns my drop by 3%, while a 'failed transition' could result in returns dropping by up to 17.5% over a 40-year period.

Finally, ESG policies have now become a part of the pension's investment principles, the report said, which includes guidelines to promote climate-aware risk management with its asset managers.

"The Fund demonstrates its strong commitment to managing climate-related risks and opportunities, as well as adopting a responsible investment approach, with the implementation of a new Environmental, Social and Governance (ESG) Policy," noted Ossi Malmberg (pictured above), chair of the fund's Governing Board.

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