According to the the Dutch Association of Sustainable Investors (VBDO): “Dutch pension funds hardly give any information on how they include social and environmental aspects in their asset management.”
The VBDO reported that the total volume of socially responsible investments (SRI) of Dutch pension funds had increased to about 3.3% of their total assets by the end of 2003, from less than 1% a year earlier.
The VBDO has analysed the 2003 annual reports of 73 pension funds, and found that just under one-third provided information on their activities in the area of SRI, while the other reports provided no information at all. Of the 23 pension funds providing SRI information, only nine supported this information with quantitative data.
It is interesting that this should be so in a market which is considered to be one of Europe’s most advanced in terms of institutional investing. Given that environmental issues are becoming more and more important in the Netherlands, this lack of transparency appears contradictory.
There is a gudeline of the Council for Annual Reporting which states that all institutions, including pension funds, should disclose in their annual report what they are doing in respect of CSR or SRI. “But it is voluntary and it is very easy for funds to comply,” says Piet Sprengers, VBDO’s managing director. “All they need to do is say that they have been looking at corporate social responsibility CSR issues.”
He adds: “The reason for this is political. The government wants to regulate CSR as lightly as possible; it does not want to interfere in the market where these issues are concerned. It wants to encourage change but not through legislation.”
In terms of legislation, it seems there would be duplication anyway. “EU directives should change things for the better,” says Sprengers.
There are also two schools of thought among pension funds on fiduciary responsibility: one that says that sustainability issues should be considered, another that says they should not.
Sprengers notes that in general it is the sector funds that consider that CSR issues are important, while company funds on the whole are more skeptical.
For example PGGM believes that companies with a good record on corporate social responsibility will outperform those that don’t in the long term. “So they are more open about reporting on these issues,” says Sprengers.
He adds: “Funds like Shell, Philips and Ahold are less sure. They want to experiment and see if the companies their funds invest in deliver the expected returns. They are doing this behind the scenes so that if it doesn’t deliver they can stop and nobody will know. Dutch funds seem willing to
take risks until it comes to addressing CSR.”
Sprengers adds: “One of the problems with pension funds on this issue, is that they think that good governance means sustainability. But good governance does not necessarily mean that a company is profitable or conducting its business in a sustainable manner.”
He explains that in the coming year there will be more initiatives from the VBDO and from trade unions towards pension funds. “Until now trade unions have not been very active on this issue,” he notes, “despite having their own investment code of conduct and being on the boards of most large funds.
“The trouble is that unions fear that if they ask for CSR issues to be taken more seriously they will be seen has having a political agenda. If such a suggestion comes from the union it will not be seen as common sense.”
In the long term this lack of disclosure and lack of activity in addressing investment strategies that incorporate CSR could lead to funds underperforming. Sprengers stresses: “We must start the debate and include all public interest groups.”
But he notes that progress among funds may take some time. “Pension funds don’t want to start a discussion on the issue while there is such a gap between beneficiaries’ views of sustainable investing and what pension funds are actually doing. There are some beneficiaries who would like their pension fund to be managed on an SRI basis but do not have the freedom of choice.”
In spite of the fact that the current situation might well be down – at least in part – to the fact that the present guidelines are purely voluntary, Sprengers does not believe that legislation would provide the solution. “I think we can organise enough pressure on pension funds,” he says. “There are enough possibilities to have a good debate on the subject.”

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