Dutch pension funds appear to have difficulty incorporating impact investing into their investment policy, according to research by the Association of Investors for Sustainable Development (VBDO), among 44 of the largest Dutch funds.
The results come from the VBDO’s recent study Pension Funds and Impact Investing 2022 – Time to move the needle. Jacqueline Duiker, project manager of the study, explains: ‘The difficulty in incorporating impact is particularly visible in pension funds that adhere to traditional principles with regards to risk/return, size and track records of an investment fund. Pension funds indicate that they are looking for more impact funds’.
Of the 44 researched pension funds, 43% have no illiquid impact investments. This limits the illiquid impact of investments, with only 25 pension funds active in this market.
Measuring impact remains challenge
Impact investing is one of the most complex and challenging investment strategies when it comes to sustainable investing. At the same time, impact investments are of the utmost importance when it comes to contributing to solutions in the real world.
Pension funds expressly demand standards, measurement methods and KPIs when it comes to impact, the research also shows. At the same time, a multitude of standards and measurement methods are available. However, these are often used statically to measure impact afterward. Rarely are they deployed more dynamically to establish intention, additionality and measurability as a clear policy, to steer toward real change.
Differences in approach
Frontrunners take extra effort and ignore traditional views. Duiker: ‘Some funds create specialist impact teams, while others opt for innovative financing structures. There are also pension funds that adapt their views on risk/return and track records to the reality of the impact of the market.
Focus on climate change by medium and small
When it comes to impact investing, Infrastructure, investments in sustainable and renewable energy and, to a somewhat lesser extent, climate adaptation are the most chosen investment themes. Mainly small and medium-sized pension funds are focused on climate change. Across the board, there seems to be a cautious increase in biodiversity and nature-related solutions.