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IPE special report May 2018

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ABP hits carbon emission reduction target two years early

Dutch civil service scheme ABP has made considerable progress in reducing carbon emissions from its investments, exceeding the target it had set for 2020.

In its annual report about sustainable and responsible investment for 2017, the scheme said the emissions reduction amounted to 28% relative to 2014. It had initially aimed to reduce emissions by 25% by 2020.

The €409bn pension fund attributed the decrease largely to deliberate choices on low carbon investments, but noted that it had been financially more attractive to invest in cleaner sectors, such as IT and financials, last year.

This meant it was possible that that its carbon footprint could rise slightly again “if necessary for a proper return”, it warned.

Last year, the pension fund increased its sustainable investments by €8bn to €50bn. It aims to add another €8bn by 2020.

The increase included adding to its stake in green bonds by €2.1bn to €3.5bn. This included a €563m investment in French green bonds, aimed at expanding sustainable energy as well as dredging the river Seine, in order to reduce flood risk as a result of climate change.

ABP has invested €23bn towards the UN’s target of making cities and communities sustainable. This included stakes in energy-efficient buildings and manufacturers of LED lights.

It has also holdings in health and wellbeing companies and and clean, affordable energy providers, amounting to €9.6bn and €6.8bn, respectively.

Last year, it increased its allocation to renewable energy by €1.2bn to €4bn, which is 80% of its target for 2020.

The civil service scheme also increased its investments in education and communication technology by €500m to almost €2bn.

ABP’s 2018 plans

It said it intended to make progress this year in classifying its current investment universe of 9,500 companies into frontrunners in responsible undertakings and laggards that are willing to improve.

ABP added that the process would follow the UN Global Compact criteria for responsible undertaking, including human rights, employment rights, environmental issues and corruption.

Of the 593 companies the pension fund assessed in 2017, 478 qualified as frontrunners. It decided that 22 of the 115 companies identified as stragglers had improvement potential.

The civil service scheme said it had developed a new assessment framework for excluding investment in specific product categories, which had led to the exclusion of tobacco and nuclear arms.

Part of the scheme’s engagement activities involved discussions with manufacturers about remuneration policies. In ABP’s opinion, weak remuneration policies had encouraged recent cases of malpractice relating to deceptive software.

The pension fund also revealed that a survey of its participants had found that they considered the link with returns as the most important element of sustainable and responsible investment.

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