Asset AllocationNovember 17, 2015

Dutch Pension to ‘Halve Carbon Footprint by 2020’

PFZW is to overhaul its investments in energy, materials, and utilities in the next five years.

Reported by Featured Author

One of Europe’s largest pensions is to divest from companies with high carbon dioxide emissions as part of a plan to halve the portfolio’s footprint by 2020.

PFZW, the Netherlands’ pension for health and social care workers, said the decision had been made following research conducted with its asset manager PGGM. The research concluded that “pension capital should be more focused on companies that will be able to anticipate a sustainable future” to reduce the fund’s exposure to the financial risks of climate change.

“In this process pressure will be exerted on companies to remove fossil fuels from their business operations as much as possible.”The process will involve a “phased exclusion” of companies with high emissions. PFZW said in a statement that coal producers would be “largely eliminated” from its portfolio by 2020 as part of a move to exclude more than 250 companies.

PGGM is to engage in “intensive shareholder dialogue” with portfolio companies in the energy, utilities, and materials sectors on behalf of its primary pension fund client.

“In this process, preferably together with other long-term investors, pressure will be exerted on companies to remove fossil fuels from their business operations as much as possible,” PFZW said.

“The capital freed up will be reinvested in CO2 outperformers in these three sectors,” the pension added.

PFZW said it aimed to increase its exposure to “impact investments”—assets that directly address climate change issues—to 12% of its €161 billion ($172 billion) portfolio. These are to include “solutions for water scarcity and food security, two topics that are related to climate change and in which Dutch expertise can play an important role”.

PGGM’s CIO Eloy Lindeijer said PFZW was “raising the bar” by increasing its allocation to impact investments. “This calls for PGGM as pension investor to develop an innovative approach to shape the move towards more sustainability,” said the CIO Power 100 member.

Peter Borgdorff, director of PFZW, added that his fund’s members “want their pension capital to contribute to a better world instead of depleting it.”

Pension funds and endowments have come under pressure to divest from oil and coal producers in recent years, but have taken divergent paths to addressing beneficiaries’ concerns. In the UK, the London Pension Fund Authority has resisted pressure to divest, insisting its existing environmental, social, and governance policy was sufficient.

PFZW has recent history of a positive outcome from divestment, however: In January it announced it had unwound its 2% allocation to hedge funds, netting a $56 million profit in the process.