Half of Dutch pension funds misalign their portfolio and SRI policy, says Dutch SIF study

The VBDO, the Dutch Social Investment Forum and member of Eurosif, has found that 44% of Dutch pension funds do not properly align their investment portfolios with their respective responsible investment policies.

VBDO’s  annual Benchmark on Responsible Investments showed that requiring asset managers to operate in line with the goals of the pension fund is not common practice among asset owners.  

VBDO stated: “This means that their objectives, ESG themes and/or ESG integration strategies are not consistently executed by the appointed asset managers. There are no pension funds that can show that the real-world impact of their investment portfolio is consistent with their RI investment policy.”

Pension funds, rather than asset managers, VBDO said, should take the lead when formulating, monitoring and evaluating performance on RI objectives and goals.

The study also found that pension funds should be paying more attention to the integration of ESG factors when it comes to developed market bonds, including government debt. 

According to VBDO, more than half of Dutch pension funds (56%) do not systematically integrate ESG criteria in their bond selection process.

Quoting a report by the European Insurance and Occupational Pensions Authority, VBDO warned that there is limited knowledge regarding climate risk, and sovereign bonds are the least covered area in this regard. 

VBDO said: “Given the importance of sovereign bonds to pension funds’ investment portfolios – comprising almost a third of their holdings – pension funds should assess if developed countries pursue policies in line with scientific climate scenarios.”

Another area where there is room for improvement is engagement with governments.

“The scores show that many pension funds can improve in this area, both in terms of creating a formal government engagement policy and when it comes to the reporting and measurement of progress.” 

VBDO’s study found that just four pension funds engaged with governments at the time treasury departments were issuing, refinancing or at the maturity of bonds. That was limited to countries in the emerging markets regarding issues such as environmental management and punishment of same-sex marriage.

PFZW, the scheme for Dutch healthcare workers run by PGGM, is one of the institutional investors that said it regularly engages with governments as a result of bond purchases. 

PFZW Director Peter Borgdorff saidt that engagement with governments is not yet commonplace in the investment industry.

“Governments play an important role in achieving climate and social goals and create the preconditions within which our investments in the private sector operate. We therefore see it as our fiduciary duty to continually put this on the agenda,” Borgdorff said.