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Dutch pensions sector to draw up ESG covenant

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The Dutch Pensions Federation plans to draw up an environmental, social, and governance (ESG) covenant for pension funds, which would also involve government and societal organisations.

The agreement, for “international corporate social responsibility” (IMVO), is aimed at improving co-ordination and the exchange of expertise between pension funds, which should result in shared definitions and standards, according to the federation.

A spokesman said that 70 pension funds – representing 84% of Dutch schemes’ assets – had already signed the declaration of intent for the covenant.

The federation indicated that it was still assessing which organisations it would approach for the agreement.

Currently, almost every Dutch scheme has an ESG policy based on the sector’s code for pension funds and the Pensions Act. The latter requires schemes to report on how they take the environment, climate, human rights, and social relations into account.

In practice, however, every pension fund lays the emphasis in a different way, depending on industry, sponsor, or occupation of its participants.

The Pensions Federation said it would seek a covenant “matching the sector’s diversity and offering added value to the pension funds and society”.

It added that it wanted to use the OECD’s directive for multinational companies, as well as the UN’s Principles for Responsible Investment and “guiding principles” for companies and human rights for its ESG agreement.

The €382bn civil service scheme ABP said that pension funds could benefit from each other’s experience and added that joint definitions and standards would help them operating more efficiently.

ABP, however, emphasised that agreements must be clear, measurable, and feasible.

Meanwhile, a separate study by GRESB and consultant Finance Ideas has suggested that only the largest pension funds, such as ABP and the €185bn healthcare fund PFZW, deploy all available tools for ESG policy.

The study, which examined 171 pension funds, found that only the largest schemes took part in impact investing and had set reduction targets for carbon emissions.

“Small funds have insufficient staff to implement ESG,” said Piet Eichholz, professor of finance at Maastricht University, who guided the survey. “Moreover, they are often passive investors.”

In his opinion, increased co-operation could enable smaller pension funds to increase their potential for ESG policy.

The researchers also concluded that the richer a pension fund is, the more attention it pays to social and responsible investment.

Eichholz said they did not find a difference in ESG approach between the large sector schemes and company pension funds.

GRESB – which leads ESG efforts in the real assets space – and Finance Ideas looked at nine different ESG criteria, ranging from impact investment to full exclusion.

According to Eichholz, all pension funds had excluded companies from investment, such as manufacturers of cluster munitions.

Six out of 10 schemes reported extensively about their ESG efforts, with half of the surveyed pension funds using engagement and voting during annual general meetings.

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