Dutch asset owners must make 1.5°C pledges to catch up with European peers
While the Netherlands is seen as a leader in responsible investing, only one Dutch asset owner has joined the Net Zero Asset Owner Alliance
Only three Dutch asset owners have, at the time of writing, disclosed that they will limit their climate impact in line with the 1.5°C goal. And only one Dutch asset owner - Unilever’s pension funds fiduciary Univest - has joined the Net Zero Asset Owner Alliance (NZAOA). Compared to other countries with major asset owners leading the way in sustainable investment, the Netherlands seems to be lagging behind when it comes to making these commitments.
There are multiple ways for asset owners to set climate targets, but targets will only make a tangible difference if they actually lead to the necessary reduction in emissions and have an impact on the real economy. If only focusing on portfolio footprints, asset owners risk only realising a ‘paper reality’. Only through the financing of solutions, collective advocacy and engagement towards governments, companies, sector platforms and asset managers, will it be possible for asset owners to contribute to reaching 2025, 2030 and further interim goals in the run up to net zero in 2050.
In order to stay on the 1.5°C warming path and avoid devastating impacts for people and nature, we need to create a Paris-aligned financial sector, in which financed emissions are reduced in line with the requirements set out under the Paris Accord. While policymakers should ensure that the finance sector aligns with 1.5°C regulation through sector-wide regulation, momentum is growing among industry leaders for ambitious action.
The Glasgow Financial Alliance for Net Zero (GFANZ) could prove to be a game-changer. But we see very different patterns emerging across European countries with regards to the umbrella group’s Net Zero Asset Owner Alliance (NZAOA), which is supported by asset owners with more than $5.7trn in assets under management. While Univest is the alliance’s only Dutch asset owner supporter, in Germany, the insurance industry association GDV is a supporting partner (it is the first insurance industry association to become a supporter of the Alliance) and Allianz, Munich RE and KENFO have joined. France appears to have a large number of asset owners signed up, with both insurance companies and pension funds making commitments. In Denmark seven pension funds have made a pledge towards net zero, including Scandinavian/Baltic Life & Pension group Nordea. Norway’s Storebrand is one of the founding members of the NZAOA and takes an active role in advocating for the Alliance. Regardless of national pressures and commitments, these organisations of varying sizes have committed to set targets every five years until they achieve net zero by 2050 at the latest and publish reports on progress five years (and annually internally). They also collaborate in international working groups to solve key challenges.
It is critical that Dutch asset owners also make their own individual pledges and join an investor alliance such as the NZAOA
Are national reporting deadlines holding back Dutch commitments?
In July 2019, the Dutch financial sector committed to the Dutch Government’s Climate Agreement, the country's strategy to achieve its climate goals. This early sectoral commitment signed by 50 Dutch financial institutions was, and still is, unique in Europe. The sector commits itself to the goal of reducing greenhouse gas emissions by 49% by 2030 compared to 1990 (but does not have a specific ambition for 2050). The financial institutions that signed up have agreed to start reporting on the climate impact of their investments by 2020 and must draw up action plans by 2022 at the latest to limit emissions.
However, signing up to the commitment may have resulted in complacency on the part of Dutch asset owners, which may explain why they are lagging behind asset owners in other European countries that have made more ambitious commitments. Although Dutch asset owners might have intentions that align with a 1.5°C scenario, VBDO’s annual benchmarks of pension funds and insurers show that these intentions have not been communicated as of yet, possibly due to the deadline at the end of 2022.
Some of the Dutch pension funds’ asset managers have committed to the Net Zero Asset Managers Initiative, thereby pledging to limit warming to 1.5°C. We applaud these commitments. However, it is critical that Dutch asset owners also make their own individual pledges and join an investor alliance such as the NZAOA. This will demonstrate their ambitions towards their pension participants, and also has several other important benefits. First (and most importantly), joining NZAOA will assist asset owners in setting ambitious net zero goals with intermediate targets. Second, it will enable pension funds to work together with, and learn from, international peers on implementing targets, for example through sectoral pathways and by finding solutions for financing the transition. Third, it will enable the pension funds’ boards and employees responsible to adequately engage with their asset managers on climate action - an important function of the fiduciary model.
A 1.5°C commitment can’t be achieved without international collective action. Logically, this will be less effective without an ambitious commitment. We acknowledge that Dutch asset owners and their asset managers are heavily invested in and contributing to a range of key international initiatives, such as the Science Based Targets Initiative (SBTI), Task Force on Climate-related Financial Disclosures (TCFD), Partnership for Carbon Accounting Financials (PCAF) and CA100+. Although these initiatives are critical to achieving our common goals, there is still added value in international collective action on all fronts.
Only through collective advocacy and engagement towards companies, sector platforms, policy makers and asset managers will it be possible to reach our 2025, 2030 targets and net zero by 2050 (which is a key focus of the NZAOA). Asset owners set numerous targets relating to emissions, but these targets will only make a sufficient impact if they lead to organisations achieving the necessary reduction set out by the IPCC. We applaud the early efforts made by Dutch asset owners and urge them to now align targets with the net zero goal and ensure that these targets impact the real economy.
WWF-NL and VBDO are collaborating to mobilise Dutch asset owners to make meaningful commitments that are in line with a 1.5°C pathway
Nicolas Poolen is a Green Finance Advisor at WWF-NL
Mart van Kuijk is a Project Manager, Responsible Investment & Sustainability, at VBDO