Leading Dutch pension funds continue to improve responsible investment policy
ABP, the pension fund for the government and education sector, has the best developed responsible investment policy of the Dutch largest pension funds. The ten best-performing pension funds in the field of responsible investment rise well above the other forty pension funds. The midfield appears to stagnate and half of the funds do not set long-term goals on responsible investment yet. This is revealed in the ‘VBDO Benchmark Responsible Investment by Pension Funds in the Netherlands 2018’, presented on 11 October in Rotterdam. It is the twelfth time that the Dutch Association of Investors for Sustainable Development (VBDO) has executed this benchmark among the fifty largest Dutch pension funds.
For the first time in the 12-year history of the Benchmark, ABP ended higher than PFZW (Pensioenfonds Zorg en Welzijn). The top three this year consists of ABP, PFZW and a shared third place for BpfBOUW and BPL, the pension fund for the agricultural sector. These four funds are the first funds to achieve the highest possible bracket of five stars.
In addition to executing the benchmark, VBDO conducted a dialogue with the funds and discussed opportunities to make their investments more responsible. Director Angélique Laskewitz: ‘The best performing funds really show that they have implemented even more measures for improvement. They set a good example to the stagnant middle-ranking funds.’
Nearly no increase can be seen in the middle-ranking funds compared to the previous year. Just like last year, the policy of the pension funds generally remains to non-committal, according to VBDO. This is illustrated by the fact that 50 percent of the pension funds do not set long-term sustainability goals. Only a few pension funds have time-bound objectives that go beyond the next few years.
Although the two largest pension funds are leading, some pension funds prove that size does not need to determine performance. BPL, with 16 billion euro assets under management significantly smaller than the other five-star funds, is an example for mid-sized and smaller funds. SNS Reaal, number 46 in terms of assets under management, has also a very extensive responsible investment policy and ended in eighth place.
The funds that showed the largest improvements were pension fund Detailhandel (for retail) and pension fund PGB.
The urgency of sustainable investment
Laskewitz indicates that it is crucial and urgent that sustainability criteria are integrated into every investment decision. ‘Just think of the importance of investing in sustainable energy, the urgency of which is underlined by the latest IPCC report. In addition, sustainable investments often go hand in hand with good returns. Pension fund managers are still not sufficiently aware of this. There is also no good picture of all the extra opportunities this offers. For example, the assessment based on Environment, Social and Governance (ESG) factors is essential for making a risk profile of a company in which it invests.’
There is a strong need for pension funds to set clear guidelines to asset managers and discuss these with them. Laskewitz: ‘The know-how among pension fund managers needs to be increased quickly so they really start to steer towards sustainability. Now, at the most basic level, it can be a glorified box-ticking exercise of asset managers.’
The fifty largest pension funds manage a total of 1.226 billion euros assets. That is 92 percent of the total assets under management of all Dutch pension funds.
ABP Response: Cooperation is important
‘ABP is very pleased with the valuation. We see it as an incentive to continue working. ‘, Responds ABP board member José Meijer. ‘We also congratulate our fellow funds with the achievement of the five stars, and certainly also the funds that show a big increase. Collaboration is important. We are making good progress, but a lot still needs to be done, and we can best achieve this by acting jointly. ‘ ABP: ‘Among other things, the development of the method to determine whether an investment contributes to the Sustainable Development Goals (SDGs) has contributed to the highest valuation by VBDO. APG and PGGM have developed this method together for Pensioenfonds Zorg en Welzijn (PFZW) and ABP. We have looked at how we can invest in each development goal. This means researching when you really contribute to, among other things, good education or combating global poverty. ‘