Dutch multi-sector scheme PGB has selected three ‘focus themes’ for its sustainable investments – besides climate change, the selected topics are loss of biodiversity and sustainable and affordable food systems.

The €37bn pension fund took the decision after surveying its members’ preferences regarding sustainable investing. “These are the themes that members find really important. Starting from 2024, these focus themes will get extra attention and determine the direction of our sustainable investment policy and its implementation,” the fund said in its annual report it published this week.

In the same survey, PGB asked its participants about their preferences regarding sustainable and responsible investment. It showed that seven in 10 participants want the fund to invest sustainably and responsibly first and foremost, while only 5% give precedence to good returns over sustainability. The remaining 25% of members took a neutral stance on the topic.

“Personally, I think this is a great result,” commented PGB chief investment officer Peter Kolthof. “Although it also indicates that we need to explain even better to that remaining 30% why sustainable investment is important.”

Green bond audit

As the consequences of climate change are “becoming increasingly clear”, according to PGB, the fund has also made its requirements for green bonds to be included in the portfolio more strict.

From now on, it will only invest in a green bond if its issuer has had an impact audit done by a third party.

The fund has also tightened its policy on fossil investments: it will no longer invest in companies that derive at least 10% of their revenue from thermal coal, shale gas and/or oil sands. Previously, this limit was 25%.

Finally, in line with many other pension funds, the scheme also made its country policy more strict. From now on, investments will no longer be made in government bonds and state-owned companies of a large number of countries with poor scores on environmental and climate issues, human rights and/or corporate governance.

At the moment, however, that policy has little impact because PGB invests almost exclusively in Dutch and German government bonds.

Magnificent seven

PGB posted a 15.5% return on its equity portfolio, more than 3 percentage points lower than the benchmark. According to the fund, this was because PGB invested relatively little in the ‘Magnificent Seven’ – the seven largest US tech companies that benefited greatly from the rise of artificial intelligence in 2023.

The performance of the fund’s factor investing portfolio also lagged the market.

Separately, PGB suffered big losses on its real estate portfolio, which returned -11.5%. Infrastructure (6.4%) and private equity (5.4%) did better, but the pension fund still ended the year in the red overall for its alternative investments in the return portfolio.

On alternative investments in its matching portfolio (emerging market corporate loans, bank loans and high-yield bonds), a positive result (8.8%) was recorded. A positive result was also achieved on its matching portfolio (12.8%), bringing the total return to 11.7% and increasing fund assets to €31.8bn.

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