Swiss pension fund coalition to rate emitters in fresh net zero engagement push

A coalition of Switzerland's biggest pension funds has launched an engagement initiative with the country's biggest emitters in a fresh net zero push.

The Ethos Foundation, a group that consists of Swiss pension funds, has rolled out a new strategy aimed at measuring the credibility of companies' net zero plans. 

A key element of the plan is to start active engagement efforts with the biggest polluters, firms that are in the investment portfolios of the pension funds that Ethos represents. 

Companies will be given a 'temperature score' by linking rising temperatures to the entity's climate performance, in order to challenge firms more effectively on their climate targets. The new metric is called the Ethos Climate Transition Rating.

Currently, 177 pension funds and several other Swiss institutions are members of Ethos, managing total assets of more than 343 billion Swiss francs.

'Credibility factor'

Explaining the new initiative, Ethos CEO Vincent Kaufmann said that “our goal is to engage with this methodology the biggest emitters, [whether] companies score the highest temperatures and contribute to global warming, companies with low credibility."

Kaufmann called it “very important for us" to have an own methodology to assess companies' net zero progress. 

"We decided to introduce the 'credibility factor' to assess whether companies do everything they can to reach their net zero ambitions,” he added.

“As an investor, you normally look at the carbon footprint, which is backward looking, so you do not take into consideration any forward-looking aspects. Therefore, we thought it was important to have another metric," Kaufmann elaborated.

'Tool' for pension funds 

The credibility score will largely be based on "the realistic achievements of the companies’ climate targets," based on past and ongoing goals and targets, as well as their assessing low-carbon transition (ACT) rating, Kaufmann continued.

“Using the ACT assessment framework, an initiative from the French government, will be useful for the say on climate votes at general meetings to define our voting positions."

He stressed that the scores will provide pension schemes "a tool" to measure their investee companies' impact on climate change.

“We will propose to pension funds that are our members to measure the temperature of their portfolios to see how their investments are impacting climate, a requirement also of the [Swiss pension fund federation] ASIP reporting framework as issued in December [2022],” Kaufmann concluded.

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