PostNL, the €8.4bn Dutch sector scheme for postal staff, said it had reduced the carbon footprint of its equity holdings by 22% after re-investing €1bn in the 25% best scoring sustainable companies.
As a result, its increased and passively managed stake in the so-called best-in-class companies had raised the overall return of the equity portfolio by 1 percentage point, it said in its annual report for 2018.
It added that it had also improved its GRESB score for non-listed property by 4.6 percentage points to 80.6%, outperforming the benchmark by 13.6 percentage points. The score is an environmental, social and corporate governance (ESG) performance measure.
The pension fund said that its current ESG policy focused on the UN’s Sustainable Development Goals (SDGs) of health and wellbeing, affordable and sustainable energy as well as climate.
As a consequence, it had already abandoned investments in tobacco, extended its exclusion policy for thermal coal and decided to increase its stake in green bonds.
“If this works out well, we will consider filling in our entire credit allocation with green bonds in a next stage”
René van de Kieft, PostNL chairman
René van de Kieft, PostNL’s chairman, told IPE that the pension fund initially wanted to raise its stake in green bonds to 2% of the total portfolio.
“If this works out well, we will consider filling in our entire credit allocation with green bonds in a next stage,” he said, adding that this would amount to an investment of “hundreds of millions”.
As at the end of 2018, the scheme had invested 10.6% in total in three credit funds with its asset manager, TKP Investments (TKPI).
PostNL has also established a long-term investment portfolio with thematic ESG goals of technology, innovation and sustainability.
0.6% loss, custodian negotiations update
The pension fund posted a loss on investments of 0.6% over 2018, which it largely attributed to falling equity markets.
Its 28% worldwide equity portfolio fell by 6.7%, whereas its 8.5% property holdings of predominantly non-listed property gained 7.7%.
PostNL’s fixed income allocation (65%) of mostly euro-denominated government bonds and mortgages gained 2.1%.
The scheme further indicated that its dynamic hedge of the interest risk on its liabilities, which stood at 55% at 2018-end, had contributed 0.5 percentage point to its overall result.
In contrast, it had lost 1.2 percentage point on its 50% currency cover of its equity investments in US dollar, British pound and Japanese yen.
Over the past 10 years PostNL’s returns have been 8% on average, it said.
PostNL tendered for a new custodian last year, and van de Kieft told IPE that negotiations were at an advanced stage. It currently uses CitiBank for its holdings with TKPI.
TKPI also used to be PostNL’s fiduciary manager until the scheme appointed Kempen Capital Management to this role to split asset management and advisory services.
In January, PostNL granted an inflation compensation of 0.72%, based on a funding of 116% at year-end. At the end of May, its coverage ratio had dropped to 114.7%.
PostNL reported administration costs of €155 per participant and said it spent 0.34% and 0.16% on asset management and transactions, respectively.
The pension fund has 18,590 active members, 46,000 deferred participants and 30,815 pensioners.