How two of France’s biggest retirement schemes think about sustainable finance.
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RI has partnered with the Committee on Workers Capital (CWC) to publish a series of CWC Trustee Profile interviews with union-nominated pension fund trustees that touch on the role of individual board members in driving innovation around responsible investment at their funds.
Philippe Soubirous is Vice-President of Préfon and a board member at Ircantec, where he represents plan members as a representative of French union Force Ouvrière. He is also the co-founder of the Réseau d’administrateurs pour l’investissement responsable (Trustee Network for Responsible Investment), known as RAIR, in France.
Ircantec (the pay-as-you-go pension arrangement for non-tenured employees of the state, territorial authorities and public bodies) is a French supplementary pension scheme managed by a joint board of trustees with 34 members (16 employer representatives, 16 beneficiary representatives and two qualified members). The scheme has a pay-as-you-go and a statutory reserve component. The scheme has circa €10bn invested in bonds, shares, real estate and alternative investments (including private equity and impact investing). The fund delegates 90% of its assets to external managers.
The fund, which has responsible investment principles as a significant part of its manager selection criteria, has been involved in some of the biggest RFP tenders in recent years:
Préfon established an individual, optional supplementary pension scheme for civil service employees, former employees and their spouses in 1967. It is managed by a board of trustees composed of a maximum of 40 members. The members of Préfon’s governance structures are from the four founding trade union federations – FO, CFDT, CFTC and CGC – or official representatives of the civil service.
Préfon does not directly manage the Préfon-Retraite pension scheme. Instead, it holds a group insurance policy with CNP Assurances, reinsured by AXA, Groupama and Allianz, through which each insurer is responsible for the scheme’s financial management. Préfon ensures respect for the principles of solidarity, social progress and equality in the management of the funds through the selection of socially responsible investments.
1. Why were you interested in becoming a pension fund trustee?
Philippe Soubirous: My interest developed through my work in the trade union movement, which began with work on legal issues such as pension law. Over time, I was asked to take part in boards of trustees and I developed an interest in pensions. I am trained as a lawyer and I worked in the courts for 7-10 years. During the pension reforms implemented in France in the 2000s, I worked on the legislation regulating pensions. I have always carried out this work within Force Ouvrière, the French trade union.
2. How are the values of the beneficiaries you represent reflected in the funds you manage? And how has this changed over time?
First of all, we should note that the issue of financial and extra-financial pension reserves management is a very recent one. Up until the 2008 crisis, no substantial questions were asked. The emergence of the ERAFP (Établissement de Retraite Additionnelle de la Fonction Publique Pension Scheme) pension fund was a game changer, since its trustees opted for a very robust socially responsible investment (SRI) policy as soon as the plan was established. The beneficiaries’ values are reflected in two different ways.
The emergence of the ERAFP pension fund was a game changer
Firstly, in terms of the plan governance structure, which brings together employer and worker representatives. The trade union representatives clearly contribute social values, such as the principles of solidarity and respect for rights. These values have been formalized and articulated in the form of SRI charters. The charters were drawn by bringing principles and strategies – such as security selection and shareholder engagement – to the table. Universal values and principles such as those enshrined in international conventions are given priority. Ircantec was quick to adopt a very well-structured SRI charter. Under this plan, the board of trustees has a fiduciary duty that requires this approach.
Préfon, on the other hand, has completely delegated its asset management and it endeavours to share its SRI approach with the insurers who have fiduciary responsibility over the assets and their management. The growing global overall awareness of the issues at stake assists us in setting extra-financial guidelines for the plan.
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