EMEA

Luxembourg Sovereign Pension Fund Subject to OECD Complaint 

Greenpeace alleges the fund does not conduct due diligence in line with the OECD Guidelines for Multinational Enterprises or align with the Paris Agreement.  

Greenpeace Luxembourg has lodged a complaint with the Organisation for Economic Co-operation and Development (OECD) against Luxembourg’s sovereign pension fund, after four-year talks broke down over its climate and human rights risks.  

On 11 March, Greenpeace Luxembourg filed a complaint against Fonds de Compensation de la Sécurité social (FDC) with Luxembourg’s OECD National Contact Point (NCP). In the complaint, the NGO claimed that the FDC does not have a risk-based human rights and environmental due diligence policy in line with the OECD Guidelines for Multinational Enterprises. Further, it said the FDC does not conduct due diligence in line with the guidelines, including preventing and mitigating impacts linked to its investments.  

The OECD Guidelines are an important tool for investors in informing their approaches to human rights and responsible investment. They are voluntary but widely considered a global standard for responsible business conduct and human rights.  

The complaint also said that the FDC did not align with the goals set in the Paris Agreement and had not implemented measurable objectives, targets, and strategies for addressing environmental impacts such as climate change. FDC has also made misleading claims relating to the sustainability of its investments, said the complaint.  

Greenpeace Luxembourg has asked the FDC to establish a sustainable investment strategy in line with the standards in the guidelines. This would require the fund to implement risk-based due diligence and climate commitments in line with the Paris Agreement; carry out human rights and environmental due diligence in relation to investments; and establish a grievance mechanism, including an ethics committee, in line with the expectations in the United Nations Guiding Principles on Business and Human Rights (UNGPs) allowing stakeholders to report sustainability-related issues.  

Talks on transparency  

Speaking to ESG Investor, Martina Holbach, Campaign Manager at Greenpeace Luxembourg, said it had been trying to get information on climate-related financial risks from the FDC since 2019. It initially lodged a legal case against Luxembourg’s government, which confirmed Greenpeace had the right to ask for, and access information from the FDC on climate risk. But the courts also said the government minister overseeing the FDC was under no obligation to respect the Paris Agreement. “It was a partial win, and a partial loss,” she said.  

The FDC published a climate report the following year, which Greenpeace Luxembourg used to analyse its investments annually. “We’d been screening them for companies which are carbon-intensive and were having lots of meetings with them, and at the back end of 2022, we were heavily involved in talks about its investment strategy,” she said. 

The talks were focused on the development of a coherent investment strategy regarding the climate, environment and human rights issues, and establishing a regular review process. 

After publication of the FDC’s annual climate report last July, Greenpeace Luxembourg requested a meeting, as it had done in previous years. “They said that they have their opinion, and we have our opinion, and that’s that,” said Holbach. “We decided we needed to continue the conversation and therefore decided to file a complaint under the OECD Guidelines. 

“Through this mediation process, we hope to get back on the same table with the FDC to discuss how the fund could improve its investment strategy.”   

Cases lodged at OECD NCPs are typically against multinational companies, but there has been one previous complaint against a sovereign pension fund. In 2012, the Norwegian Government Pension Fund Global was subject to a complaint for its exposure to South Korean steel manufacturer POSCO, which was constructing a power plant that risked leading to the physical and economic displacement of more than 20,000 people.  

Last month saw the first time that index providers were subject to an OECD complaint. The complaint alleged that MSCI, FTSE Russell and S&P Dow Jones Indices had allowed ESG-labelled investments to be directed towards firms linked to Myanmar’s military regime.  

Industry norm  

Antoniya Argirova, Climate Justice Campaigner at Greenpeace Luxembourg, said the OECD human rights complaint mechanism could be used increasingly as part of investors’ human rights and environmental due diligence processes. “It’s a skill that’s new for many institutional investors,” she said.  

She added that it was a norm that was gaining in importance as the OECD Guidelines were being integrated into legally-binding legislation such as the EU’s Sustainable Finance Disclosure Regulation (SFDR) and Corporate Sustainability Reporting Directive (CSRD). 

Antony Crockett, Partner at law firm Herbert Smith Freehills, said there had been a steady increase in complaints filed with OECD NCPs, usually referring to a specific environmental or human rights issue. 

He said the nature of the complaint against the FDC, which refers to its governance, is a more recent phenomenon. “This type of complaint was probably not what was originally envisaged. But more likely or not the NCP will decide it can deal with the complaint.”  

An FDC spokesperson said: “The SICAV complies with existing legislation and is supervised by the financial authority, the Commission de surveillance du secteur financier (CSSF). Once a year, all the SICAV’s activities are audited by an external auditor. The SICAV also complies with the European SFDR.

“The SICAV’s promoter is a public institution which is not in scope of the OECD guidelines. The FDC’s sustainable investment strategy is in line with its legal mission and is set out in its directive of the board of directors, which was approved in January 2023 by the minister in charge of social security.” 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2024 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

To Top
Share via
Copy link
Powered by Social Snap