The €29.4bn Dutch pension fund PGB wants to halve the carbon footprint of its total investment portfolio in two years’ time. Separately, the fund is also planning to divest from coal, shale gas and oil sands from 1 January 2021.

The multi-sector pension fund is taking both steps with a view to reaching the goals of the Paris Climate Agreement.

“And we also want to reduce the risks climate change poses to our pension investments and improve our prospective returns,” said Rob Heerkens, a member of the fund’s board of trustees.

“Besides, we have also concluded that our members want us to do something about the climate problem,” he added.

A PGB member survey in 2016 found that 90% of its members wanted the fund to invest in renewable energy, while only 37% said they want their pension to be invested in fossil fuels.

In a separate 2019 survey, three quarters of members said they expected PGB to actively contribute to a better world through its investments.

Fossil fuel divestment

Though PGB is stopping short of divesting completely from fossil fuels, it will exclude all companies that get more than 25% of their revenue or electricity generation from coal, shale gas and/or oil sands as from next year.

Since 2018, the fund has already been excluding companies that have their revenue derive more than 50% from coal.

PGB expects the stricter policy will lead to forced selling of stocks and bonds of approximately 50 companies. The additional exclusions are expected to lead to a CO2-reduction of 10-20% in the equity portfolio, according to a spokesperson.

The fund said it is looking at possible additional steps it could take to further reduce exposure to fossil fuels.

It has yet to work out how it will exactly reach the remainder of its 50% carbon reduction target in two years’ time. “We are taking this step by step,” a spokesperson said in response to questions from IPE.

The fund is looking to use company carbon risk ratings it obtains from Sustainalytics as an instrument to reach its target.

“How this will be done in practice is currently being prepared by our asset manager PGB Investments and will become clear at the start of next year,” she added.

The fund’s non-listed investments in infrastructure, private equity and real estate are also expected to contribute to reaching the reduction target.

“We are currently investigating the carbon footprint of these investments and are looking at ways to measurably reduce emissions in these asset classes too,” the spokesperson said.

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