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French €6bn fund Ircantec outlines governance/ESG investment steps in new charter

Voting and ESG integration form major pillars of strategy.

Ircantec, the €6bn French public pension fund, has published a comprehensive charter setting out how it applies responsible investment based on the UN-supported Principles for Responsible Investment and the UN Global Compact, which includes a rare move for a French institution into a developed corporate governance and share voting strategy. The fund – the “Institution de retraite complémentaire des agents non titulaires de l’État et des collectivités publiques” (supplementary pension institution of non-permanent staff of the state and public authorities) – is housed within France’s Caisse des Dépôts, the French quasi treasury fund, and takes in pension contributions from almost three million professionals across industries as diverse as hospitals, the civil service and France’s partially state-owned electric and gas companies. In 2012, Ircantec awarded a series of ten environmental, social and governance (ESG) mandates to seven asset management firms.
 On shareholder engagement, the fund says it will vote its shares with a focus on issues of executive pay, shareholder rights, accounts and management audits and treasury management. It said its voting policy is still being fully defined. The move is rare in France where shareholder activism is not common.In 2012, ERAFP, the €14bn Paris-based 100% SRI pension fund – a sister French public pension fund of Ircantec – also took the step of implementing a detailed voting and engagement strategy to cover its relationship at annual general meetings (AGMs) with investee companies. Ircantec’s board said the charter was created so that the fund could fully reflect the long-term interest of its beneficiaries, take into account its belief that ESG factors can influence investment returns to varying degrees across asset classes and sectors, and put the fund in step with the major sustainable growth objectives of society.
The fund says the other major aim of the charter alongside active engagement will be to integrate ESG into portfolio decisions. It said corporate exclusions would be based on international norms, but that its priority in equities is ‘best in class’ selection of companies that favour social progress, environmental protection, sustainable development and good governance. In government bonds, Ircantec says it will favour states that promote health and education, environmental protection, biodiversity, anti-corruption, the adoption of international treaties and freedom of expression. For real estate, it said its RI policy will focus on investing in socially orientated property such as medical establishments, retirement homes, student accommodation and contracts for building improvement around environmental performance and tenant welfare.