The Dutch pension federation has taken issue with the with an ESG management best practices document published by pension regulator DNB. The regulator must better take into account the difficulty of smaller funds in changing their investment policies if their risk exposure exceeds the guidelines, according to the Pensioenfederatie.

desert drought arid land

The document consist of ten good practices to help pension funds to manage their exposure to different ESG risks, such as climate risk or child labour. It was first published for consultation in February this year.

DNB has included examples of how a pension fund can manage these risks in practice. However, according to the Pensioenfederatie, these are mostly applicable to pension funds that manage their assets actively. “For pension funds that invest passively, it’s in principle not proportional or realistic to meet these guidelines,” the federation said in its official response to the document.

Pension funds should define indicators to measure each ESG risk separately, according to DNB. They also should formulate a norm that cannot be breached. For the ESG risk ‘human rights’ this can for example be a certain number of companies involved in serious human rights controversies. If pension funds breach their self-imposed norm, they would need to take action.

The Pensioenfederatie notes that smaller pension funds can usually only take limited action if a norm is breached, because they cannot easily exclude certain companies or switch to an active fund. “After all, in standard passive investment products, a manager tends to follow a standard benchmark.”


According to the Pensioenfederatie, several other issues it noted earlier haven’t been fully addressed either. These include the risks around the availability and reliability of data. The federation would also like to see a list of examples of ESG risks pension funds should address. It would like to see these linked to the SFDR’s Principle Adverse Impact indicators.

Finally, the Pensioenfederatie complained the good practices have a one-sided focus on climate risks. “This makes the document more a good practice for climate risk management than for risk management in general,” it notes.