PFZW, the €161bn pension fund for the Dutch healthcare industry, is planning to cut the carbon footprint of its investments over the next four years by offloading those holdings producing the most CO2 emissions.
After conducting an in-depth study, the pension fund concluded it should focus its assets on companies able to “anticipate a sustainable future”.
PFZW said companies that had a bigger impact on the environment than their rivals were likely to underperform over the long term, and that it would divest almost all of its coal holdings before 2020, when it expects to have reduced its exposure to fossil fuel companies by 30%.
Divestments will focus on energy, utilities and materials, which account for roughly 70% of the CO2 emissions produced by PFZW’s equity portfolio; the pension fund is to re-invest those proceeds in companies that outperform in those sectors.
The healthcare scheme will make the divestments in four, quarterly stages, affecting more than 250 companies.
However, a spokesman at PGGM, PFZW’s asset manager, said the cost of the divestments would be minimal, as the pension fund “already has the means to identify the CO2 emissions of individual companies”, while the divestments and reinvestments will simply be part of the “regular flow of portfolio changes”.
During the staged exclusion process, the pension fund will engage in extensive dialogue with shareholders, encouraging companies to reduce fossil fuels in their business operations.
PFZW added that it would increase investments in “solutions” by four times, to 12% of its entire portfolio, over the next four years. These impact investments – covering such things as water scarcity, food security and healthcare access – aim to address climate problems directly.
Peter Borgdorff, PFZW’s director, said the portfolio changes would be a major step towards achieving the goals set out in its responsible investment policy, launched in 2014.
“Our participants also want their pension capital to contribute to a better world instead of depleting it,” he said.
Both PFZW and PGGM said they would welcome similar initiatives from other long-term investors, “as these are necessary to push businesses towards more sustainable behaviour”.
They also called on politicians to reach solid climate agreements in Paris to reduce global carbon emissions.
Last month, the €345bn civil service scheme ABP announced that it would reduce the carbon footprint of its investments by 25% over the next five years, largely by cutting its equity holdings from 5,000 to 3,500 companies.
It also plans to double its ESG investments from €29bn to €58bn.