Dutch civil service scheme ABP is to sell its €15.5bn allocation to fossil fuel investments. The pension fund cites recent reports from the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) as reasons for the step.
ABP, which has some €528bn in assets under management, will sell its fossil fuel assets in several phases. The investments in listed equities and bonds of fossil fuel firms, amounting to €12bn, will be sold by 2023. The fund’s €3.5bn allocation to commodity-related infrastructure, such as pipelines, will also be sold but ABP doesn’t yet know by when it will be able to complete this divestment.
The divestment decision does not concern ABP’s sizeable allocation to commodity derivatives (€19.4bn at the end of 2020), which also includes investments in oil and gas futures. “We are yet to decide whether we will sell all our commodity investments or restructure the portfolio,” an ABP spokesperson told IPE.
Since 2015, ABP has based its climate policy on the insights of the IPCC, the pension fund said in a press release.
“The recent IPCC report shows that all over the world people are already experiencing the physical effects of climate change, and that without stronger action global warming will reach an unacceptable level,” it said. “To combat global warming, CO2 emissions must be reduced quickly and drastically.”
ABP chair Corien Wortmann said phasing out fossil fuel investments quickly is necessary to deliver on the goals of the Paris Agreement. She said: “We want to contribute to minimising global warming to 1.5 degrees Celsius. Large groups of pension participants and employers indicate how important this is to them. The ABP Board sees the need and urgency for a change of course.”
ABP follows in footsteps of PME, Horeca
ABP is not the first large pension fund in the Netherlands to divest from fossil fuels. Technology industry scheme PME announced in September it had sold all its fossil fuel investments.
Horeca & Catering, the fund for the hospitality industry, announced similar steps one day earlier, but still retains €80m in high-yield bonds of fossil fuel firms.
Daan Spaargaren, responsible investment strategist at PME, commented on ABP’s decision: “I’m very happy ABP is following in our footsteps,” he said, adding he hopes other funds will now follow too.
“But in the end it is up to a pension fund and their stakeholders whether to divest from fossil fuels or not,” he added.
Engagement focus switch
With the divestment decision, ABP has abandoned its belief that engaging with oil and gas firms would ultimately steer them in the right direction. Other Dutch pension funds including PME and PFZW have been selling their stakes in some fossil firms, such as ExxonMobil, because engagement with these firms had been yielding insufficient results.
“We part with our investments in fossil fuel producers because we see insufficient opportunity for us as a shareholder to push for the necessary, significant acceleration of the energy transition at these companies,” said Wortman, who added ABP will instead focus its engagement efforts on bulk users of fossil energy such as electricity companies, the car industry and aviation.
She said: “Using our influence as a shareholder, ABP will encourage companies that use fossil fuels to become more sustainable. We will further tighten the criteria for these investments in 2022. We will also continue to advocate for governments to move towards further CO2 pricing in the industry. And we will continue to push for an end to subsidising fossil fuels.”
ABP, which aims for carbon neutrality in 2050, will also formulate new CO2 reduction targets next year. The pension fund will also tighten its sustainable and responsible investment policy in other areas, such as conservation of natural resources, digitalisation and human rights.
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