Established in 2005, KB First Pension Company (KB First) provides industrywide multi-employer retirement plans in the Republic of North Macedonia through two defined contribution schemes, one mandatory and one voluntary. The KB First Open Mandatory Pension Fund is currently in a high-growth accumulation phase of both assets and members. Assets under management have grown by almost 98% to €1.2bn over the past five years, with major outflows not expected until 2030. The average age of its members is 37, resulting in an average investment horizon of around 30 years.

KB First’s long-term investment objective is a return of 2 percentage points above inflation. Believing that international developed equities carry a higher volatility and therefore a higher potential return than other asset classes, it has built exposure to these investments to 30% - the legal maximum – out of a total equity allocation of 32%. It does this by using equity ETFs to minimise non-systemic risk and costs, while matching market performance.

Recently, KB First analysed the effects of implementing ESG principles in its portfolio – a big challenge, given its strategy of investing its equity allocation in ETFs. Based on the analysis, it decided to use a targeting approach. The goal was to improve the ESG score of the existing foreign equity portfolio to at least equal the ESG score of the MSCI ACWI ESG Universal Index, its chosen benchmark. KB First has since increased the ESG score of its foreign equities by 20% while decreasing its carbon intensity by 50%, while maintaining a similar risk/return profile. This resulted in a return on foreign equities higher than before ESG was implemented; its total return for 2023 was 6.46%, giving an average return of 5.74% for the past ten years.

KB First has also begun to diversify into ETFs concentrating on artificial intelligence (AI), not only reflecting its commitment to sustainable investing but also positioning it at the forefront of innovation.