NETHERLANDS – The €60bn pensions provider Syntrus Achmea has developed a new benchmark for ESG investments in the government bonds of emerging markets, including China, Brazil, Russia and Indonesia.
The new standard has been set up for the €10bn pension fund for the agricultural sector (Landbouw), which has invested €150m in emerging markets government paper, Syntrus Achmea said.
Gerard Roest, employees chairman of the scheme, said: "Investments in emerging markets debt is attractive, because of the right risk/return ratio.
"Because we prefer to invest in a socially responsible way, we have asked Syntrus Achmea to develop a new model."
According to Roest, the pension fund is satisfied with the results so far and has requested the pensions provider to "elaborate" the method.
Syntrus Achmea said the new benchmark fit its goal to integrate ESG themes into all of its investment decisions.
It said its portfolio was based on JPMorgan's Emerging Markets Bond Index Global Diversified, an index of liquid government bonds in hard currencies, such as the US dollar and the euro, with solid creditworthiness.
Syntrus Achmea said: "For reasons of stability, countries with a limited weighting have been excluded, as well as countries under sanctions from the Dutch State for violations of international law or human rights."
The remaining countries are assessed using eight ESG criteria, with an above-average return leading to a larger weighting in the tailor-made benchmark, and a below-average performance having the opposite effect.
"The weighting of the individual ESG factors, as well as adjustments with respect to the standard, are established in consultation with the pension fund's board," the provider added.
Annette van der Krogt, Syntrus Achmea's manager for responsible investment, said: "We see a clear added value in a focus on emerging countries with a sustainable economic development and a high creditworthiness.
"We expect countries that score well on ESG themes are better able to fulfil their long-term commitments and contribute positively to the risk/return ratio of investments."
Syntrus Achmea manages the pensions of approximately 3m Dutch workers and pensioners at more than 80 pension funds.