If there were ever an ideal Austrian candidate for the UN-backed Principles for Responsible Investment (PRI), it would be Fair-Finance, a €90m pension fund launched in 2010 with the backing of German sustainable bank GLS and German sustainable insurer oeco capital.
GLS, itself a PRI signatory, and oeco capital each own 27% of Fair-Finance. The remaining 46% is split between founder and CEO Markus Zeilinger and 18 other private shareholders, including the editor of a renewable investment magazine.
Not surprisingly, the multi-employer scheme has strict sustainable criteria for its investments, 90% of which is fixed income. The scheme says the huge exposure to bonds is necessary to meet a guaranteed return of 2.25% on paid-in savings.
According to Zeilinger, Fair-Finance relies on both exclusion and a best-in-class approach to select its bonds, sourced from governments, banks and corporates. “In terms of exclusion, we, for example, don’t invest in bonds from countries with more than 10% of nuclear energy in their energy mix. We also avoid bonds from companies that manufacture armaments,” Zeilinger told Responsible Investor in a recent interview.It holds sovereign bonds from Austria, Belgium, Poland, Ireland, Germany and the Netherlands. It also has acquired debt from mostly Austrian companies it deems sustainable. They include oil firm OMV, building materials firm Wienerberger, wooden floors firm Egger and Conwert, a residential property investment firm.
In deciding what debt to invest in, Fair-Finance is assisted by a team of sustainable analysts at Erste Bank, the listed Austrian savings bank. These analysts, in turn, make use of data from German ESG research firm oekom.
The remaining 10% of Fair-Finance’s assets are split evenly between equities and property funds. Zeilinger said that broadly speaking, they met the same sustainable criteria as its bond investments. In 2012, the pension fund returned 6.2%, which was above the industry average of 4.3%.
Zeilinger says signing up to the PRI is “definitely on our to-do list”, having spent three years establishing itself. Austria currently has just one asset owner signatory to the PRI, the €5bn VBV pension scheme. Two asset managers – Erste Bank and Absolute Portfolio Management – are also signatories.