The VBDO, the Dutch Association of Investors for Sustainable Development, has developed a sustainability star ranking system for the country’s €1trn pension fund sector.
The new approach replaces the quantitative ranking system that was previously used at the annual benchmark that has now been running since 2007.
The VBDO (or De Vereniging van Beleggers voor Duurzame Ontwikkeling in Dutch) looked at the 50 largest pension funds by assets under management, using data from the central bank.
Just five funds gained four stars: civil service fund ABP, health and well-being sector fund PFZW, construction sector fund bpf BOUW, agricultural sector scheme BPL Pensioen and housing fund Pensioenfonds voor de woningcorporaties (SPW).
Interestingly given its corporate sponsor’s focus on stability, Unilever’s Pensionsfonds Progress was among 13 in the lower three-star category – alongside the likes of engineering sector fund Pensioenfonds Metaal en Techniek (PMT) and the transport sector Spoorwegpensioenfonds.
The two-star category includes funds like Pensioenfonds Vervoer and the Philips and Rabobank funds. The Shell, ING and Delta Lloyd pension funds get one star. There are five that receive no stars at all. They are: steel industry fund Hoogovens, pharmacy sector scheme PMA and three funds for airline KLM. No fund received five stars.The VBDO says the star system “shows a more realistic depiction of the sustainability of pension funds” – to inform them about their “realistic contribution to a sustainable world”.
Of the funds covered by the report, just 42% demonstrably set sustainability targets for their asset managers, the VBDO says. And the use of ESG information on a strategic level “remains uncommon”.
The use of ESG in asset-liability modeling (ALM) was measured for the first time this year. Despite ALM being common practice, “only 6% of the pension funds integrated sustainability information”.
Also the report found that 73% of pension funds in the report do not have a policy on tobacco.
Another notable finding was that 26 funds said they did not lend securities during 2016, with several saying this was based on risk or ethical considerations. Eighteen funds have measures in place to integrate sustainability into lending (i.e. responsible securities lending).
There is clearly work to be done, says VBDO Executive Director Angélique Laskewitz in the foreword to the report. She points out that just a quarter of the pension funds currently incorporate the Sustainable Development Goals, in some form, into their responsible investment policy. “I therefore recommend pension funds to clearly link and integrate the SDGs into their responsible investment policies.” VBDO home page