5 Dutch Pensions Call On Government to Lead Energy Transition

Five Dutch pension funds published a letter to Netherlands lawmakers, seeking government collaboration to set the country up for successful energy transition investing, as the right-wing PVV party, which received a plurality of votes in November 2023 elections, seeks to form a government coalition.

The five pensions responsible for the letter, among the largest in the Netherlands, include Stichting Pensioenfonds ABP (manages 502 billion euros, or about $543 billion), Pensioenfonds Zorg en Welzijn (266 billion euros), Pensioenfonds Metaal & Techniek (74.79 billion euros), PME Pensioenfonds (50 billion euros) and BPG Bouwpartner Groep (11.1 billion euros), with all figures according to the most recent data. Combined, these funds manage over 900 billion Euros.

In the letter, released on Wednesday, the pension funds argued that a public-private partnership is needed to further accelerate energy transition in the country.

“We want to join forces with the government and offer our joint (financing) strength and expertise to make an important contribution to the energy transition in the Netherlands,” a translation of the letter stated. “To really give energy to the transition, cooperation between pension funds, municipalities, network companies and other government agencies, under the strict direction of a national investment institution, is necessary.” 

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Earlier this month, ABP, the largest of the funds, announced plans to make $30 billion in impact investments by 2030, with $10 billion of that investment, including allocations to biodiversity and climate-related investments, to be realized in the Netherlands.

“We are convinced that collaboration between the private sector, pension funds and the government will accelerate the energy transition in the Netherlands. A stable investment climate is essential to enable pension funds to make sustainable investments that are profitable for the participant and contribute to a sustainable future for society as a whole,” the letter states.

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Tags: ABP, BPF Boewpartner Groep, Bpf Bouw, Netherlands, Pensioenfonds ABP, Pensioenfonds Metaal & Techniek, Pensioenfonds Zorg & Welzijn, Pensions, PFZW, PME, PME Pensioenfonds, PMT

Prof. Daniel Kahneman. Photograph by Princeton University, John J. Jameson.

A hardy appreciation of irrationality is a prized trait among some of the best investors. Those who saw the threat of the housing bubble before the 2008 market crash can back up that assertion.

And they can thank Daniel Kahneman, who built his academic career and won the Nobel Prize for economics in 2002 on the insight that, contrary to the long-held belief that investors were rational beings, they often are not.

The branch of economics he helped found, behaviorism, charted the many ways people, in general, and investors, in particular, get their thinking warped by emotional reactions, mental shortcuts and other acts not in their own self-interest.

A Ph.D. in psychology who had never taken an economics course, Kahneman died on Wednesday at 90, leaving a big legacy in economics. He sometimes is known as “the father of behaviorism,” a label he dismissed. Kahneman, who taught at Princeton University, already had developed theories about behavioral pitfalls early in his academic career, but his friendship with an economist, Richard Thaler, who won a Nobel Prize in economics in 2017, helped him shift his focus to economics.

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Along with Thaler (based at the University of Chicago) and another professor, the late Amos Tversky (Stanford University), Kahneman developed many theories about poor judgment. One was called “judgmental heuristics,” about the common practice of taking mental shortcuts, which acts to save time but also can lead people astray. Example: learning to beware of slick-talking financial hustlers like Bernard Madoff could lead you to stay out of the stock market entirely.

Kahneman came to wider public notice with his 2011 best-selling book, “Thinking Fast and Slow,” about a duality in human behavior. Thinking fast is emotional and instinctive; thinking slow is more logical and deliberate. The book covered some of his theories, such as “sunk cost,” in which people keep pouring money into an investment even though it is clear the endeavor was a loser.

Behavioral biases are omnipresent, Kahneman wrote—and other research has shown they even effect pension decisionmaking. A 2017 paper by four British academics (three of them in psychology, one in finance) concluded that pension boards of trustees, are deficient in financial know-how, and thus make decisions that are often removed from pure rationality, as Kahneman outlined. Board members let other influences sway them, the paper stated, and so they “have an illusion of effectiveness.”

Kahneman and behaviorism have had widespread influence, including in the world of retirement planning. For instance, Thaler and a younger behavioral economist, Schlomo Benartzi, formerly at the University of California, Los Angeles, two decades ago formulated payroll savings plans that feature auto-enrollment, which overcome employees’ inertia about signing up. These are used broadly now throughout corporate America.