Dutch fund PGB ups ESG ante for a livable world

Field of tulips and wind turbines during sunrise in the Dutch countryside. Eemshaven, Groningen, Holland.

PGB Pensioendiensten, pension provider for Pensioenfonds PGB (PGB), the Netherlands €32 billion industry-wide pension fund, has rewritten its sustainable investment strategy. Backstopped by a new purpose to invest in a “liveable world” it has positioned investing sustainably at the centre of its strategy rather than as an “afterthought.”

“For us, sustainability is an inseparable part of all our investments. We make an integrated assessment between return, risk, costs, and sustainability with every investment,” states the pension fund.

The recently published strategy is rooted in the results of a survey amongst its 128,000 beneficiaries that revealed 70 per cent of fund participants consider sustainable investing important.

From this, the fund has drawn up three key investment themes around climate, biodiversity and sustainable nutrition, targeting reducing the CO2 footprint of the investment portfolio by half by the end of 2030 and climate neutrality by 2050 at the latest.

Strategies include re-examining and tightening the requirements it imposes on green bonds. Like demanding an independent audit of the promised impact around energy saving or renewable energy use in a green bond.

Elsewhere, PGB has cut the carbon footprint on its listed investments further compared to the previous year and has committed to providing insight into the negative impact of its investments.

“We do this according to the EU rules based on a ‘declaration of adverse effects’, according to the Sustainable Finance Disclosure Regulation. The first report for 2024 will be in mid-2025,” it states.

In another seam, the fund has improved its collection and analysis of ESG data, allowing it to use data to inform new policy and communication with participants, regulators, and the media.

“Thanks to our improved data management, we can report more confidently on our sustainable investment and the results,” it states.

In 2023 the fund excluded government bonds and state-owned companies in 173 countries while 752 companies were excluded from investments because they do not meet the minimum sustainable investment requirements.

Since 2023 PGB has reported the ‘financed emissions’ and ‘implied temperature rise’ (ITR) per year-end in its portfolio, insofar as data was available. Financed emissions amounted to 52 tons per million euros invested for listed corporate bonds and 46 tons per million euros invested for listed shares. This produces an average of 48 tons of greenhouse gases per million euros invested, states the fund.

Investing in solutions

In another pillar, PGB seeks to strengthen sustainable entrepreneurship via ‘capital allocation’ and actively investing.

“We cannot achieve our goal with exclusions alone,” it states.

PGB rewards companies that emit fewer emissions by investing relatively more in cleaner companies against the benchmark.

“At the same time, this means that we invest less in companies that have less sustainable entrepreneurship. Research shows that this approach is not necessarily at the expense of expected returns if the country and sector distribution of the benchmark is maintained.”

In 2021, PGB joined the SDI Asset Owner Platform, the international platform that measures the contribution of investments to SDGs.

“Using this platform, we can calculate what contribution the listed equity and bond portfolios have delivered on the various SDGs. In addition, we also receive reports on the contribution of real estate funds and alternative fixed income securities”.

PGB returned 11.7 per cent in 2023  with a coverage ratio of 112 per cent. The improved funded position puts PGB in an enviable position, able to increase pensions and keep the pension premium the same.

“That is good news for all our participants and employers,” it concludes.

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