Investment strategy for 2020–2023
The strategic aims of the investment activities steer the long-term activities of the Church Pension Fund. The purpose of the strategic aims is to ensure that the Fund is able to pay out future pensions and to control the development of the pension fund contributions paid by the parishes. The strategic aim of the Fund’s investment activities is to accumulate the assets needed to cover its pension liability in a profitable, secure and responsible manner.
The changed situation of the Fund was taken into account when drafting the strategic aims. The Fund has shifted from an accrual phase to a transition period in which the amount of the pension expenditure permanently exceeds the amount of pension contributions. The result is that the yields from the Fund’s investments are now being used towards the payment of pensions.
Return and risk targets
The Church Pension Fund’s long-term real return target is 3.0%. This return target is in line with the return targets of other Finnish pension providers. The aim of the investment activities is to exceed the annual yield of the benchmark index as set in the Fund’s investment plan and to succeed in the comparison with other public-sector pension investors. The Fund endeavours to reach its targets with the help of tactical allocation and active investment strategies and in a manner that takes ESG issues into account.
From an investment standpoint, the greatest risk is that the set return target will not be realised in the long term. The Church Pension Fund’s long-term goal for the annual risk level is 9.5%. The development of the yield from and risk involved in the investment activities is monitored, in the long term, as part of the annual report and, in the short term, as part of monthly reporting.
The Church Pension Fund is committed to responsible investment with the aim of remaining a forerunner in responsible investing in Finland. This means that ESG (Environment, Social and Governance) issues are taken into account in all the Fund’s investment activities. The Fund complies with the Guidelines for Responsible Investment (2018) approved by the Board and the Principles for Responsible Investment (PRI).
The Fund is actively involved in the process of advancing awareness about responsible investing by operating openly, sharing information at various forums and working together with other institutional investors.
The Board of the Church Pension Fund has appointed a separate Responsible Investment Work Group to support the development of its responsible investing activities.
The Climate Change Strategy of the Church Pension Fund was published in autumn 2016. The aim of the strategy is to consistently reduce the carbon footprint of the investment activities through the application of various climate change tools.
The decision concerning strategic allocation is the most fundamental factor when endeavouring to achieve long-term return and risk targets. Strategic allocation allows for the sufficient diversification of investments to different asset categories while also striving to reduce the total risk of the investments. The table below shows the long-term strategic allocation of the Church Pension Fund for the years 2020–2023. Since the beginning of 2020, the fixed-income investments also include alternative fixed-income and the equity investments include private equity investments.
The annual investment plan steers the tactical allocation
In addition to strategic allocation, the practical investment activities are steered by the basic allocation of the investment plan, which is annually approved by the Board. The emphases guiding the Church Pension Fund’s tactical allocation are reviewed and, if necessary, are revised in the annually drafted investment plan. A target allocation with a percentual range is determined for each asset category.