Responsible Investor

makes, not just issues within its sector. For example, we do not compare automobile companies, but companies within the whole transport sector. Another significant factor is that the SRI rating of a company is entirely separate from the financial rating. There is no financial influence on our responsible judgement.” The fund also started a commercial venture with Raiffeisen Bank in Switzerland and co-launched four SRI mutual funds based on its own methodology and sold by the bank as the Raiffeisen Futura Funds. Pfeifer says: “We also have assets invested in these funds. One of them, a Swiss equities fund has been one of the best performing in Switzerland, and not just amongst SRI funds. As a pension fund we are normally above the relevant benchmarks such as the Pictet BVG93 for Swiss pension funds. The fund also has separate segregated mandates with asset managers, which have to work within its ratings criteria. Current managers include Swiss houses, Pictet and Vontobel. Real estate is another area where the fund has a significant allocation, both direct and indirect holdings. The indirect holdings are managed through a range of funds over which Nest has no control and which Pfeifer points out are not SRI. Nevertheless, in its direct real estate holdings – i.e. the buildings it physically owns – Nest can and does apply energy efficiency standards in the pursuit of better returns. Significantly, for this reason, it proposes to buck the institutional market trend by decreasing its property fund exposure and buying more buildings.

“Our energy efficiency programme is carried out in partnership with the Alternative Bank of Switzerland and we are testing a new strategy which takes into account real estate standards put together by the Swiss Centre for Responsible Investment. We only have real estate exposure in Switzerland, which does make it more manageable for energy efficiency.” Pfeifer says the real estate discussion is part of a broader strategy rethink that could lead to manager hires in 2008: “We are quite risk averse and have 57% of assets in fixed interest, both credits and government bonds, 23% in equities and 20% in real estate. Our question is how we can take a bit more risk. We are interested in private equity and have a small allocation with Partners Group in Switzerland, which does have elements of Cleantech investment. Partners Group reports to us on what they buy and we look through that for potential issues with our SRI policy, although it should be said that we are not as strict about how we invest in private equity as in other asset classes.” Pfeifer says Nest is following closely the debate on cleantech and renewable funds, particularly based around the water conservation theme, and that they have looked at some interesting hedge funds operating in the SRI arena: “We think we will end up hiring other managers in 2008. We have seen studies that say that performance is not worse from SRI, but we have had good performance! There is of course a danger that as more investors start investing in this area returns could come down.”

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