The two schemes for the Dutch metals industry no longer want to invest in countries with a score of four or lower on the Economist Intelligence Unit’s Democracy Index.
PMT and PME were already using a bespoke index for their investments in emerging markets, excluding state-owned enterprises and government bonds of a few dozen countries based on three other criteria: corruption, climate policy and competitive power.
Under the existing policy, which was introduced in 2019, countries such as Russia, China and Saudi Arabia had already been excluded.
The metal schemes now also exclude countries that are considered authoritarian by the Economist Intelligence Unit, they say in their annual reports for 2021.
According to PMT chief investment officer Hartwig Liersch, 59 countries currently classify as authoritarian. Since PMT did not invest in most of these countries anyway because they had already been excluded on the basis of one of the three other criteria, the direct effect of the policy change is limited.
The €70bn PMT’s asset manager MN sold some €200m worth of government bonds of Egypt and Vietnam as a result of the change.
It wasn’t the war in Ukraine that prompted PMT to further accentuate democratic values in its country policy, according to Liersch.
He told IPE: “We realised that we had included a number of countries in our portfolio that we believed were authoritarian. We want to invest in countries that respect human rights and as such are a right fit with the norms and values that PMT stands for.”
Fair living wage
Ditching authoritarian countries will not be the last change to PMT’s country policy. Last year, the fund started an investigation into the question of how its country policy can better reflect priorities regarding human rights and the energy transition.
For its research, which PMT is carrying out together with its asset manager MN, several NGOs and other experts in the field were consulted.
“One of the recommendations that transpired from these discussions was to also evaluate a country based on its potential to make progress, and not just on the current state of play,” PMT’s annual report said.
PMT is also considering to include in its country policy factors such as freedom to join a trade union and a fair living wage, which is seen as helpful in the fight against child labour. PMT is aiming to finalise this aspect of its revised country policy later this year.