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Newsmakers

UK Trade Organization Seeks to Define ESG

The Investment Association attempts to clear up three key issues in the space.

By Chris Butera

UK’s trade body for asset managers wants to take care of one of the top issues with environmental, social, and governance (ESG) investment practices: how to properly define it.

The Investment Association has opened an industry-wide consultation on the subject, which ends March 1. It aims to bring “greater clarity to help savers and investors navigate and better access this growing feature of the investment management industry.”

The move will cover three topics regarding responsible investments and sustainability practices:

  • The creation of a standard ESG definition. ESG has inherited many names over the years, such as impact investing and negative screening. This initiative would simplify those with an agreed-upon definition of ESG.
  • The development of a UK product label for retail investors and their advisers to easily find funds that have sustainability practices.
  • A review or “stock-take” on reporting structures US money managers use to make their ESG decisions and the results these investments have had on bigger sustainability indicators.

The organization’s “definitional framework” used interpretations from the US-based collaboration group the Global Sustainable Investment Alliance to present early definitions for the space.

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Chris Cummings, the Investment Association’s chief executive, said the asset management industry is at a “critical juncture in embracing sustainability” as well as defining the investment practice.

“With sustainability and responsible investment becoming an increasing priority for today’s investors, this consultation is an important step forward in gathering the views of the industry with the ultimate aim of bringing greater clarity to savers,” he said.

The Investment Association’s 250 members collectively manage $10.1 trillion in assets. Members must contact the organization directly to make their suggestions to the consultation.

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Home > News > Risk > Dutch Pension Fund ABP Loses 2.3% in 2018 After Rough Q4
Risk

Dutch Pension Fund ABP Loses 2.3% in 2018 After Rough Q4

$454.9 billion pension fund blames losses on market turmoil.

By Michael Katz

ABP, the €399 billion ($454.9 billion) pension fund for government and education employees in the Netherlands, saw all of its gains for the first three quarters wiped out due to “market turmoil” in last quarter of the year. This lowered the fund’s coverage ratio to 97.0%, from 104.4% at the end of 2017.

The fund lost 4.6% in the fourth quarter and ended the year down 2.3%.  Although ABP’s available capital rose in the first three quarters from €409 billion to €419 billion, it then fell €20 billion in the fourth quarter alone to end the year at €399 billion.  

“2018 was a year with ups and downs,” ABP board Chairman Corien Wortmann-Kool said in a release. “In the first three quarters of 2018, the financial position improved step by step. But the stock markets, which turned deep red in the fourth quarter, threw a spanner in the food of investors. “

Wortmann-Kool attributed the poor stock performance at the end of the year to the trade war between the US and China, as well as concerns about Brexit and economic growth expectations, among other factors.

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The fund said that over the past five years, it has achieved an average return of more than 6%. However, it added that it expects returns to decrease over the next 10 to 15 years to an average of 5%.

As a result, Wortmann-Kool said, “there is a chance that the pensions will be reduced and that the pension increase will be far away in the coming years.”

The fund also said lower interest rates had an impact on its results. It said the notional interest rate fell by 0.1 percentage point in the fourth quarter, and the impact on the value of the pensions that ABP has to pay out in the future was a “substantial increase” to €411 billion at the end of the year 2018 from €396 billion.

“This increase too had a drastic effect on the funding ratio,” said Wortmann-Kool, who added that “if the interest rate falls, a fund must keep more cash in order to be able to meet all obligations.”

The fund’s top holdings have a heavy technology slant, which includes shares of Samsung Electronics, Apple, Chinese technology giant Tencent, Taiwan Semiconductor Manufacturing, and Alibaba.

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