The Board of Trustees ofPC2 considers that the incorporation of Socially Responsible Investment (SRI) in the investment process of the Fund has as its main objective the sustainability of the Fund, as well as contributing to the processes of analysis and decision making in investment matters, and may increase the risk/return ratio in the long term.

SRI combines financial criteria with extra-financial, environmental, social and governance (ESG) criteria:

  • Environmental: Refers to environmental policies, external and internal management systems, as well as other environmental indicators (climate change, emissions, solid waste, water, etc.).
  • Social: Labor and human rights throughout the supply chain, as well as behavior with customers and employees. It may include other topics such as diversity, animal rights and others.
  • Governance: Covers the principles and rules that regulate the design, integration and operation of corporate governance organs. Principles of good governance, diversity in the management team, having codes of ethics, etc.

SRI implementation

The implementation of the SRI Policy is a continuous, iterative and constantly improving process, which seeks to recognise the efforts of those corporations that integrate ESG criteria into their business model, as well as to encourage those that do not comply with them to develop them through dialogue processes or, failing that, to exclude them from investment.

The ESG analysis will be applied both to the current assets in the Pension Fund’s portfolio and to those that are likely to be included in it, with a prior analysis of compliance with the aforementioned criteria. At least 50% of the total assets of the Pension Fund will be subject to this provision, including equities, fixed income securities and/or alternative assets subscribed by the Fund in regulated markets, as well as investments made indirectly through investment funds, which are currently the main investment vehicle used by PC2.

The implementation of SRI in the Pension Fund, which will be exercised by the Management Company, will be carried out in a complete and global manner in all asset classes where there is a level of development and public information that allows for a correct implementation.

The Management Company will engage the services of an external rating agency specialised in ESG analysis to assess compliance with ESG criteria in the portfolio.

Methods of implementing ESG criteria in PC2

1. Analysis based on standards

Within the Fund selection process, priority will be given to selecting funds that show a commitment to international standards on environmental protection, labour rights, human rights and anti-corruption.

Specifically, within the qualification process (due diligence) of funds, preference will be given to those that:

  • Have an SRI policy.
  • Be signatories to the United Nations Principles for Responsible Investment (PRI).
  • Are organized in a member country of the Organisation for Economic Co-operation and Development (OECD).
  • Encourage commitment to international treaties and regulatory frameworks in the companies in which they invest.

2. Integration of ESG criteria

The rating of each investment fund analysed will be obtained as a result of the aggregation of the companies’ ESG ratings obtained by the appointed rating agency. The objective is to constantly improve the ESG rating of the pension fund.

In addition, the information that is obtained constitutes a selection argument for the Management Company, both for the improvement of the portfolio rating and for the exclusion policy.

3. Exclusion or negative analysis

Those companies or business groups that fall within a set of qualitative and quantitative measures defined by the Board of Trustees will be excluded from the investment universe.

Thus, companies or groups that carry out all or a significant part of their activity in the Tobacco, Weapons or Gaming sectors (gambling or betting) will be excluded. For control purposes, significant activity is considered to be that which reaches or exceeds 35% of a company’s sales. Funds will be excluded from PC2’s portfolio in case they hold more than 5% of assets in companies that are excludable based on the criteria set forth herein and they do not agree to reduce its positions in these companies