Italy’s Laborfonds expects RI mandate surge

Ethical investment options are proving attractive for Italian employees

Laborfonds, the €451m ($619m) defined contribution pension fund for workers in the Italian region of Trentino-South Tyrol, is likely to increase future allocations to responsible investment, according to consultants working with the fund, after it recently tendered for investment managers to run a €20m global ethical portfolio. Angelo Mutinelli, a consultant with Pensplan, which is advising Laborfonds, said the amount invested could surge as the fund takes in increased worker contributions: “We are seeing a lot of interest in the ethical funds and we think they will grow quickly.” Laborfonds has set up a working group on socially responsible investment to sit alongside its investment committee.
A sharp rise in ethical assets at Laborfonds would indicate that growing numbers of Italian workers are choosing responsible investment portfolios for their retirement assets. Laborfonds has 83,000 members who can choose from four fund options for their pension investments. As well as the ethical option, it has two balanced funds that mix equity, bonds and cash investments, and a guaranteed income fund.
The fund’s current €20m ethical mandate tender will limit equity investment to 25% with the remainder likely to beinvested in bonds. The selection of managers is scheduled for later this year.
Mutinelli said the mandate would focus positively on companies with good sustainability, development, human rights, corporate governance and environmental policies, but exclude investment in arms or related industries.
Italian workers were recently allowed to start investing an expected pot of billions of euros into pension plans rather than keeping it in traditional severance pay accounts known as the TFR (trattamento fine rapporto). The TFR is estimated to be the equivalent of 6.7% of Italian salaries and could amount to an annual flow of €13bn into private pension schemes if all workers decide to take up the pensions option.
Pension funds providing TFR funds have to guarantee a 3.1% minimum annual return on invested money. 
Italian employees can currently invest for retirement through either company specific pension funds, known as closed-end plans, or open-ended mutual fund arrangements.
In July this year, the Italian government said it would raise the statutory retirement age from 57 to 60 years as of 2008.