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Illiquid investments

The Pension Fund’s illiquid investments include real estate and forest investments, private equity investments, infrastructure investments, illiquid fixed-income and absolute return investments.

Real estate and forest investments

The Church Pension Fund is a long-term real estate investor that complies with the principles for responsible investing and requires responsible and socially acceptable practices from its co-operative partners as well. Responsible real estate investing places an emphasis on environmental issues. This is due to the fact that since property and construction play a significant role in the consumption of energy and natural resources, the creation of emissions and, thereby, have an impact on climate change. The construction sector also has a positive impact on employment, and the condition of the properties has a direct influence on the lessees and the attraction of the surrounding areas. The Church Pension Fund considers ESG issues in both direct real estate investments and property fund investments. In forest fund investments, the Pension Fund also takes biodiversity-related issues into account in accordance with the recommendations of the Natural Resources Institute Finland (Luke). 

Private equity investments

Private equity is interesting from a responsible investment perspective: the private equity investor, as the owner, has the opportunity to influence company operations at an early phase, thereby helping to construct a sustainable corporate culture. The private equity investor can also support new domestic innovations and entrepreneurship, and invest in renewable energies and clean technologies. The private equity investments of the Church Pension Fund consist of private equity funds, which have many other investors. Some of the funds are so-called fund of funds, which invest in other private equity funds. The Church Pension Fund has outsourced the monitoring and administration of its private equity fund investments to an external co-operative partner. The co-operative partner conducts an ESG evaluation of new private equity funds as part of a more comprehensive investment assessment. As part of its ongoing monitoring, the Pension Fund's co-operative partner conducts an annual ESG survey for all private equity funds. 

Infrastructure investments

The focus of the Pension Fund's infrastructure investments is on renewable energy investments. The Pension Fund's climate strategy aims for a carbon-neutral portfolio by 2035. One of the tools to achieve carbon neutrality is to increase so-called green thematic investments, which include renewable energy infrastructure investments. 

Illiquid fixed-income investments

Illiquid fixed-income investments are alternative funding channels offered alongside traditional bank loan funding. Illiquid fixed-income investments include, for example, private credit and microcredit funds. The Pension Fund only invests in funds that have a good reputation and act in a responsible manner. As part of its fund selection process, the Pension Fund requires potential investment objects to commit to the ESG principles, to integrate sustainability issues into investment decisions and to provide regular reporting to investors. In illiquid fixed-income investments, the asset manager may include sustainability metrics as part of the calculation of the credit risk margin, and if the company achieves the targets, the margin will be lowered. 

Absolute return investments

The Church Pension Fund is looking for reputable and responsible funds for its absolute return investments. The Pension Fund requires its asset managers to commit to the ESG principles, to integrate sustainability issues into investment decisions and to provide regular reporting to investors. The Pension Fund has conducted a broader fund search for absolute return investments that integrate the principles of responsible investment into their investment process. The challenge is that it is much more difficult to include responsible investing in absolute return funds than in traditional fixed income and equity funds. However, the sector is constantly developing, and it is possible to find actors who are committed to responsible investment. The objective of the Pension Fund is to improve the transparency of investments from the perspective of responsible investment and to continue the development of the portfolio in this respect.