Hugh Wheelan: How I got close to Dutch politics and pension funds

Ahead of next week’s RI Netherlands conference, a temperature-take on where policy and asset owner action is heading

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Time goes quickly, and sometimes quirkily.

Twenty plus years ago, I was on an interview trip to the Netherlands and went to The Hague to talk to a young, up-and-coming politician in the Christian Democratic Party (CDA) with a strong interest in pensions and social issues called Peter Omtzigt. I then boarded a train to the south of Holland to a city I’d never heard of called Heerlen to interview Jean Frijns, then CIO at Dutch civil service pension giant, ABP (€568bn in assets), (now called APG in terms of investment operations while the core pension fund is still called ABP) at its administrative headquarters there; the investment operation remained in Amsterdam.

Fast forward to 2021 and Peter Omtzigt is at the heart of a political crisis, which he helped to reveal – the Toeslag Affair over false allegations of child benefit fraud – that caused the former coalition government to resign, and which is still causing trouble for former (and likely once again) Prime Minister, Mark Rutte, in forming a new coalition administration after Rutte allegedly sought to keep Omtzigt out of a new government.

And I’m now living in Heerlen, in the shadow of the APG building… 

Both are long tales, and not for this piece.

But they’re a good place nonetheless to swiftly gauge the political and asset owner temperature on responsible investment ahead of our RI Netherlands conference starting next week. 

Last month’s elections had a clear element of environmental politics in the broad party strategies, and helped the centrist liberal D66 party to increase its number of seats by 6 to 24, and the majority VVD party of Premier Rutte to add one more seat to give it 34 (out of a total 150, where 74 are needed for a majority).

That said, by the same token the hard right FVD party increased its number of seats by 6 to a total of 8 on a clear anti-climate stance, while the left-green party, Groen-Links, lost 6 seats to leave it with a total of 8.

Sigrid Kaag, Leader of D66 and Minister for Foreign Trade and Development Cooperation in the last government, a former UN diplomat, is pushing for a more socially-oriented government (if, as is likely, they become part of the new coalition) and is likely to be more amenable to pursuing international agreements on human and labour rights, such as the Bill for Responsible and Sustainable International Business Conduct which is bubbling away, and the slow but meaningful activity from Dutch pension funds on the IMVO Covenant on human rights (as my RI colleague, Dominic Webb, wrote this week).

Other domestic environmental issues that have been prominent in Dutch politics recently have included a conflict with EU regulations over soil nitrate levels.

That issue will no doubt become more prominent for Dutch finance organisations as they increasingly sign on to the Partnership for Biodiversity Accounting Financials (PBAF), which seeks to develop a shared method for measuring the positive and negative impacts of investments on nature, and is pushed by the Dutch Central Bank. 

Concerns about intensive farming are also clearly rising. It’s an issue which has seen the Dutch Animal Party (Partij voor de Dieren; PvdD) regularly increase its parliamentary seats, reaching 6 at the latest election.

So what does all this mean for Dutch pension funds? In a nod to where I’m now living, I spoke with Xander Den Uyl, a trustee of Dutch civil service pension fund giant ABP, as well as Chair of Pensioenfonds Werk en (re)Integratie (PWRI), the €10bn Dutch pension fund for 200,000 workers with disabilities.

Den Uyl also sits on the board of the PRI, and is – again rather quirkily – the son of Joop Den Uyl, Dutch Prime Minister from 1973 – 1977.

In terms of the current political environment, Den Uyl says he sees little new deep change for responsible investment in the Netherlands asides from a slight stretch in green policies, but notes that the approach by Dutch funds and asset managers is already very well developed. 

He points to the Dutch Climate Agreement, the finance sectors’ 2019 agreement with the government on reaching the Paris climate goals. 

And he notes that a big pension fund like ABP is regularly under pressure from NGOs, especially on fossil fuel investments, but also on human rights, as evidenced by recent calls, reported on RI, for the fund to divest from Myanmar. 

Den Uyl points to ABP’s ‘five star’ policy on responsible investment, which includes work on the circular economy, biodiversity, digitalization, the SDGs and human rights. 

ABP’s 2025 goals included a 40% CO2-reduction in its equity portfolio by 2025 (relative to 2015) and €15bn invested in renewable and affordable energy by 2025. It is also a prime mover in the Climate Action 100+ initiative and next year will publish climate targets for 2030 in line with expectations in the Dutch Climate Agreement.

The fund now publishes an integrated – and audited – financial and responsible investment report.

But Den Uyl is also interesting because he chairs PWRI, a mid-sized pension fund. It does not have ABP’s resources, but Den Uyl says it has stretching targets on climate performance and human rights, with a clear focus on delivering results. It aims to reduce its carbon footprint by 20% lower than the MSCI World index, while companies in its portfolio have to score 10% better than the broad MSCI World constituents on labour rights and health and safety markers. 

Related approaches, he says, are now widespread across the Dutch pensions sector in schemes of all sizes. Den Uyl has also formerly been a supervisory board member at the butchers pension fund and the pension fund of Dutch notaries, both of whom had different but active approaches to RI. He notes that for smaller pension funds, most of the fiduciary asset managers operating in the Netherlands now have comprehensive responsible investment strategies.

And he says it is an “active engagement” with responsible investment and its financial risk and return implications: “The time for box ticking is behind us. We have legislation here in the Netherlands, and at the EU level the IORP legislation and now SFDR, where responsible investment is becoming part of the job of being an institutional investor.”