Ten large Dutch pension funds, in co-operation with NGOs and the government, are to encourage an unnamed palm oil producer and user to improve its environmental, social and governance (ESG) credentials.
Their initiative follows the local covenant for international socially responsible investment (IMVB), based on United Nations (UN) and Organisation for Economic Co-operation and Development (OECD) guidelines, which were signed by 81 schemes in 2018.
The instructions focus on human rights, labour conditions and environment in particular.
The 10 pension funds, including civil service scheme ABP, healthcare pension fund PFZW and the Rabobank Pensioenfonds, are to take an additional step by engaging a number of companies with a low ESG score, according to the covenant’s annual report for 2019.
Last year, they started engagement with a mining firm, also unnamed.
By co-operating with NGOs and the government, the schemes want to gain additional experience and expertise. In the traditional engagement process, asset managers seldom involve NGOs and trade unions.
The palm oil industry is in the firing line because of violations of human and labour rights, including low pay, bad labour conditions as well as child labour.
In addition, environmental pressure groups are critical because of rain forest being chopped down for palm oil plantations.
Engagement with companies in the palm oil sector is still in its infancy. Last year, representatives of the pension funds were in touch with the mining firm about land rights and labour conditions.
The reason for singling out the mining company was due ot the extension of one of its mines, which led to the forced movement of dozens of resident families.
According to the covenant report, the information supplied by the company differs from the information gathered from locals by NGOs. As a consequence, the pension funds want to carry out an investigation on the spot this year.
The schemes’ goal for the three-year engagement process is for the mining firm to improve its dealings with locals and the environment.
The 10 schemes co-operating in the sustainability covenant also include sector pension funds for the building industry (BpfBouw), painters and decorators (Schilders), the agricultural secor (BPL), the retail industry (Detailhandel), the metal sector schemes PMT and PME, and the pension funds for housing corporations (SPW).