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Asset Allocation

Dutch Pension Giant ABP Commits to Net-Zero Initiative

The UK’s National Trust and the Church of Sweden are among other investors to adopt the Net Zero Investment framework.
By Michael Katz


The €499 billion ($607.6 billion) Dutch pension giant ABP, Europe’s largest public sector pension by assets under management (AUM), has joined several other European institutional investors this week in pledging to decarbonize its portfolio by joining the Paris Aligned Investment Initiative’s Net Zero Asset Owner Commitment.

The Paris Aligned Investment Initiative is a collaboration among global investors to align their portfolios and activities to the goals of the Paris Agreement, which aims to limit the increase in global temperature this century to 2 degrees Celsius above pre-industrial levels. The investors will use the Net Zero Investment Framework to meet their decarbonization goals.

Also signing up to the framework with ABP were UK conservation charity The National Trust, the Church of Sweden, the South Yorkshire Pension Fund, the Wiltshire Pension Fund, and TPT Retirement Solutions. The six new signatories join 38 asset owners and asset managers representing $8.5 trillion in assets that are already using the framework, according to the Institutional Investors Group on Climate Change (IIGCC), which established the Paris Aligned Investment Initiative in 2019.

Under the asset owner commitment, the pension funds aim to decarbonize their investment portfolios by 2050 or sooner and increase investment in climate solutions. They are also required to set interim targets for decarbonization and investment, undertake policy advocacy and engagement, and vote in line with net-zero goals. Meanwhile, the framework provides metrics and methodologies for four asset classes—sovereign bonds, listed equities, corporate fixed income, and real estate—with private equity and infrastructure to be added in the near future.

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“Climate change is one of the biggest issues facing the world today. We at ABP are taking actions in our responsible investment policy to counter it,” Loek Sibbing, an ABP board member, said in a statement. “The Net Zero Investment Framework commitment will help ABP on our pathway to an effective net-zero investment strategy.”

The Paris Aligned Investment Initiative also said it is working with the Partnership for Carbon Accounting Financials (PCAF), a group of financial institutions developing a way to measure and disclose greenhouse gas emissions of loans and investments. The two groups will develop greenhouse gas accounting methodologies for asset classes such as sovereign bonds, accounting for carbon removals/sequestered emissions and technical issues such as aggregation of Scope 3 emissions.

In June 2020, ABP pledged to reduce carbon dioxide emissions in its overall portfolio by 40% compared with 2015, invest €15 billion in sustainable and affordable energy, and invest 20% of total assets in the United Nations’ Sustainable Development Goals (SDGs) all by 2025. It said also set a goal to stop investing in coal for generating electricity in OECD [Organisation for Economic Co-operation and Development] countries by 2030.

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Home > News > Research > About That Tech Slowdown: The Big Digital Tomorrow Will Restore Its Place
Research

About That Tech Slowdown: The Big Digital Tomorrow Will Restore Its Place

Legacy stocks are leaders now, but 5G and other digital revolutions promise to return the disregarded innovators of yore to the fore again, Citi says.

By Larry Light


OK, so the old economy stock plays are having their day now, and tech sure is not. And maybe the turnabout is fair play after the long romp of tech titans such as Google parent Alphabet (up 29% in 2020, flat this year) and Apple (ahead 76% last year, also flat in 2021), when legacy industries’ stocks just wheezed along.

Sure, onetime pandemic-stricken stocks are rebounding with a vengeance. Look at those in banks, oil and gas, airlines, cruise lines, hotels, and restaurant chains. This year through last week, according to Yardeni Research, financials had risen 27.6%, energy, 45.2%, and industrials, 16.8%. Information technology (IT) has managed just 7.2%.

Before getting too deep with the schadenfreude here, Citigroup’s private bank, in its mid-year outlook, has a word of caution for those jubilant at the old-school resurgence: What you’re seeing is temporary. These soaring old-timey sectors “are enjoying a powerful recovery in earnings forecasts and equity performance,” the bank’s mid-year report stated, but “it is unlikely that they will lead markets higher in the medium or long term.”

How come? We’re only getting warmed up when it comes to digitization. And, according to Citi, the cyber comeback still has far to go. Consider the rollout of the fifth generation of wireless data technology (5G). This, the report stated, “will enable a vast increase in the number of devices connected to the internet.”

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The new capability will move beyond today’s computers or smartphones and hook up household appliances, cars, and machinery to the web. The total number of worldwide connections, Citi declared, could expand from 0.76 billion today to 3.6 billion by 2025.

To Citi, “the age of hyperconnectivity has implications for many other dimensions of digitization.” With the explosion of data upcoming, there will be a greater need for enhanced artificial intelligence (AI) to make sense of it all. And, naturally, more and more of all this will increase the need for better cybersecurity. “Smart cities, robotics, and self-driving vehicles” will flourish in such a time, Citi analysts projected.

Further, hyperconnectivity will boost other “unstoppable trends,” in Citi’s view. Chief among them: the economic rise of Asia. “Many millions of people in Asia will gain internet access for the first time,” the report maintained, “transforming their consumer behavior.”

By Citi’s assessment, “in 2021 so far, digitization has broadly underperformed old economy sectors that stand to benefit from the reopening of the global economy.” Any “further dips” in tech stocks, therefore, are a buying opportunity, it said. Shareholders in Apple, Alphabet, and the rest should take heed. Their trials soon should be over.

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