Pensioenfonds PostNL has introduced a Paris Aligned Benchmark (PAB) for all its listed investments, though the fund remains invested in fossil fuels for now. By the end of 2023, it wants to meet PAB requirements for its illiquid investments too.

PostNL is the second Dutch pension fund after UWV to introduce a PAB, which involves a commitment to aligning investments with the Paris Agreement’s 1.5°C scenario. After an initial reduction, emissions will have to be reduced by a further 7% each year.

By the end of 2023, PostNL wants to also have aligned its investments in real estate and agricultural land with the Paris Agreement, “as far as this is possible”, according to the fund’s president René van de Kieft.

The PAB bans investments in companies that derive more than 1% of their revenue from coal, 10% from oil and/or 50% from natural gas.

PostNL, however, remains invested in the fossil fuels industry for now even though it has excluded coal.

“Our ambition is to realise the carbon reduction goal of the PAB. We believe that fossil fuels are – unfortunately – still necessary during the energy transition,” said Van de Kieft. The pension fund’s investments in fossil fuels now account for 0.8% of assets.

Van de Kieft said the carbon footprint of his fund’s liquid investments had already become PAB compliant by the end of 2021. Over the past few years, PostNL had already reduced emissions considerably by introducing a new sustainable equity index and by investing in green bonds.

The investment in two impact funds run by Hermes and M&G announced earlier this year has also contributed to a further reduction in portfolio emissions. The pension fund is still in the process of selecting two additional impact managers.

High yield

Pensioenfonds PostNL asked its fiduciary manager to do a new manager search for high yield bonds as it wanted a manager that integrates ESG criteria in the investment process.

This turned out more difficult than initially thought, said Van de Kieft. “A lot of managers could not meet our demands, so we renewed our call for proposals. Important demands included a best-in-class ESG approach and a carbon reduction goal.”

Eventually, four managers met the requirements after which PGIM was selected for a high yield mandate equalling 2% of the fund’s portfolio. “We may add a second manager after some time if the category remains sufficiently interesting,” Van de Kieft added.

New EM country policy

Pensioenfonds PostNL introduced a new country policy for its emerging market (EM) investments this year.

Together with its fiduciary manager Kempen, the fund designed separate policies for its EM equity and debt portfolios.

The impact of the new, stricter policy is biggest on EM debt: in local currency five countries have been excluded, equalling 25% of total investments.

In hard currency, 21 countries or 40% of the original portfolio has been eliminated. Within the equity portfolio, only state-owned enterprises are being excluded, leaving the impact minimal at 3% of the original index.

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