Governance

Dutch retail sector pension fund taps BlackRock and FTSE Russell to develop new SDG-aligned index

Customised index will act as a benchmark for the fund’s €5.8bn developed markets equity portfolio

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Pensioenfonds Detailhandel – the €21.2bn Dutch retail sector pension scheme – will benchmark its passively-managed equity portfolio against a customised index which incorporates the four Sustainable Development Goals (SDGs) included in its sustainable investing policy.

These are: SDG 8 – Decent work and economic growth; SDG 12 – Responsible consumption and production; SDG 13 – Climate action; and SDG 16 – Peace, justice and strong institutions.

SDG 12 – which prohibits child labour among other practices – was incorporated into the fund’s sustainable investing policy only last year after approximately 50,000 beneficiaries were surveyed for their support for such a move.

Among the respondents, 67% voted in favour, while a further 57.7% of those who anticipated diminished returns as a result indicated support for the move.

Henk Groot, Head of Investments at Detailhandel, told RI that the new index is the “first step” towards integrating the selected SDGs into the fund’s entire portfolio with corporate credits and emerging market equity next in line for the exercise.The index was designed by the fund with FTSE Russell and BlackRock in a six-month consultative process.

BlackRock manages 92.5% of Detailhandel’s total portfolio, around €19.5bn. Utrecht-based Detailhandel signed up to the PRI in January last year.

According to Aled Jones, FTSE Russell’s EMEA Head of Sustainable Investment, the return profile of the customised SDG-aligned index is expected to be similar to its conventional developed equities index, with a tracking error [deviation from the benchmark] below 100 basis points.

FTSE Russell will be making a version of the customised SDG-aligned index available to investors in the coming weeks.

This is the second sustainability-focused collaboration between FTSE Russell and a pension fund in recent months after it launched a low-carbon multi-factor index fund with the UK’s Merseyside Pension Fund in January. Link