ABP, the Netherlands’ largest pension fund managing over €500 billion in total assets, has revealed a comprehensive sustainable and responsible investment policy. The pension giant aims to invest €30 billion globally by 2030 in projects ensuring both an «appropriate financial return» and a «measurable positive» contribution to the environment and society.
Ten billion euros will be allocated to climate solutions, with an additional 1 billion euros earmarked for biodiversity initiatives. Notably, ABP plans to invest 10 billion euros in Dutch impact projects, focusing on new affordable housing and sustainable energy projects, with approximately 5 billion directed towards Dutch sustainable rental housing.
ABP, the fifth-biggest pension fund in the world, acknowledged the ambitious nature of these targets, particularly concerning biodiversity. «The bar should not be too low,» it said. The fund emphasised the need for stringent conditions, understanding the challenges in finding companies that meet the criteria for impactful investments.
Sharper choices
In tandem with these impact investment plans, ABP announced a strategic shift in its equity portfolio, opting for sharper choices. Companies whose activities are intrinsically linked to climate or biodiversity damage, with no realistic improvement prospects, will be excluded. ABP expects companies with significant climate impact to present concrete emission reduction plans in the coming years and actively manage climate risks.
This portfolio transformation is expected to reduce the number of companies in ABP›s equity portfolio significantly. The fund said it seeks a more compact portfolio with larger stakes in selected companies, aiming to navigate climate change risks in a shifting economy.
The equity portfolio review will commence in developed markets, focusing on approximately €102 billion in invested assets. ABP has already decided to divest from shares related to the fossil energy sector, discontinuing investments in major names like BP, Shell, and Total Energies.
Despite these changes, ABP assured investors that the risk profile of the investment portfolio will remain stable, maintaining an effective risk mix within the realm of impact investing.
In response to potential concerns, ABP asserts that the new investment policy aligns with participant preferences.
Dilemmas unaddressed
Rob Bauer, a professor of Finance at Maastricht University and founder of the Global Research Alliance for Sustainable Finance and Investment, nevertheless urged ABP to provide more information on the participant survey underlying this conclusion. He emphasized the need for transparency, especially regarding how ABP plans to measure the impact of the €30 billion in new investments and details on the potential ‹new› risk profile.
“Scientific research does show that you don’t need much diversification if you go from, say, four thousand different stocks down to two thousand, but I would like to see how ABP came to that conclusion in this case,” Bauer said. “Show the calculations to scientists, dare to be vulnerable.”
Bauer encouraged highlighting the complexity of sustainable investing and the importance of acknowledging the inherent dilemmas in this transformative journey. “I miss the dilemmas in this story,” he said. “Sustainable investing is often a struggle and that should not be shoved under the carpet either. I think this is a great story, but I think people should share the underpinnings.”