Some 25 of 39 pension funds surveyed by Dutch pension regulator DNB have little or no idea about the ESG risks of their investment portfolios. This must change as pension funds are required by law to report on these risks.

Even though almost all pension funds now mention ESG in their investment policy and three quarters of them have a dedicated ESG trustee on their boards, they really need to up the ante in identifying the potential impact of ESG risks on their investments, said Michelle Ummels, ESG risk officer at DNB.

“Understanding ESG risks should be the start of ESG risk management,” said Ummels, speaking at a pension congress organised by IPE’s sister publication Pensioen Pro in Rotterdam earlier this week.

michelle ummels DNB

Source: Leonard Fäustle

Michelle Ummels at DNB

Only after they have taken stock of the ESG risks they are exposed to, pension funds can formulate a strategy to manage these risks, Ummels noted. DNB was not surprised by the results of the survey of the 39 funds. “It is in line with what we saw earlier from smaller samples,” she said.

Ummels added it is not that complicated to take the first steps as pension funds can draw inspiration for this from DNB’s Guide for Climate and Environmental Risks.

“It contains good best practices, especially from one pension fund,” she said. Ummels declined to name the scheme in question.

Substantial exposures

ESG risks run by pension funds include the impact of climate change and biodiversity loss on the business model of companies the funds invest in.

The exposures of Dutch pension funds to these risks are “very large,” according to Ummels.

As examples of listed investments exposed to environmental risks, she mentioned €80bn worth of investments in companies operating in areas with extreme water scarcity, €90bn of investments in fossil fuels and €95bn in companies dependent on critical raw materials.

The pension sector also has €345bn of liquid investments in sectors that are deemed sensitive to the energy transition, she added.

There is also a legal obligation to manage ESG risks enshrined in the law, resulting from the IORP II Directive that has been in force since 2019, Ummels noted.


DNB has been calling for attention for the management of ESG risks for some time, without having any fixed regulation framework for this. The regulator is currently developing this, said Ummels.

Until 2024, the regulator’s focus will be on “providing information and stimulating pension funds to take action,” she added. “From 2025, we will also set standards and actively address pension funds that do not do enough to manage their ESG risks.”

This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra