A milestone was reached in July when the first Dutch pension fund announced its divestment from fossil fuels. Surprisingly, the fund in question was neither civil service scheme ABP nor healthcare fund PFZW, the two largest Dutch funds, both of which have the ambition to be leaders in sustainable and responsible.
Instead, it was the €9bn pension fund, the Netherlands’ social security provider UWV, that took this important step.
At the same time, Dutch pension funds, including ABP and PFZW, also claim to abide by the Paris Agreement. These two things seem increasingly hard to reconcile, especially after the recent alarming IPCC report that concluded climate change is rapidly accelerating.
UWV’s divestment from fossil fuels followed, tellingly, from its decision to adopt a Paris-aligned benchmark. This suggests a more ambitious climate policy than those currently pursued by most pension funds is necessary to keep the global temperature rise below two degrees.
UWV’s science-based approach contrasts with that of most Dutch pension funds, which base their (limited) exclusion policies predominantly on ethical considerations (see country report in this issue).
While these are important too, it is time for pension funds to up their game if they want to be compliant with the Paris Agreement.
Excluding the worst polluters – including many fossil fuel producers – should be part of this effort. Sooner or later, all institutional investors will adopt Paris-aligned benchmarks anyway, whether they want to or not. Pension funds should spare themselves the embarrassment of being late to the party.