Are we doing enough?

Benchmark Responsible Investment by Pension Funds in the Netherlands 2018

This report, published by the Dutch Association of Investors for Sustainable Development (VBDO), provides a detailed overview of the current status quo and trends relating to
the responsible investment practices of the 50 largest Dutch pension funds. The pension funds are assessed based on how they govern, formulate, implement and report on their responsible investment policy. The report covers a one-year period, the calendar year 2017. The assessment resulted in a zero to five star rating and into a ranking in order of performance.

There has been little change in the responsible investment practices of the 50 largest Dutch pension funds compared to 2016. The average total score increased by a mere 0.1, showing a deceleration of the improvements that have been achieved in previous years. The top 10 performing pension funds have all improved their total scores, and for the first time four pension funds achieved a five star rating based on their improvements in the implementation category. Besides some of the major players, which have more capacity and resources to expand and improve their responsible investment policies, there are also smaller funds in the vanguard.

Several steps could be taken to further integrate responsible investment in the overall strategy of the pension fund. From formulating a clear long-term strategy and vision, to selecting an asset manager which is aligned with the pension fund’s own principles and beliefs. To harness the potential of responsible investing, pension funds can choose from several investment solutions that are being developed. Only a few pension funds explore, for example, possibilities to integrate ESG information and sustainability themes in their strategic asset allocation or ALM-modelling. As sustainability issues are becoming more mainstream in the investment process, a great deal of new information needs to be retrieved and processed. It is very challenging for a single pension fund to keep up with all these new insights, methods and metrics. Collaborating with other pension funds or experts can make the process much easier.

Partnerships and dialogue with peers and wider society could be used to jointly address developments and topics such as climate change, human rights and other themes, also related to the Sustainable Development Goals. This approach also helps pension funds to stay better aligned with the priorities of beneficiaries and stakeholders. To ensure transparency, pension funds should explain their responsible investment policy and monitor and report on progress in a clear and consistent way. This gives stakeholders an understanding
of which topics have been focused on, what steps have been taken, and what (environmental and societal) impact the investments have had.

The research and scoring methodologies are based on an iterative process, which has developed and improved over the twelve years that VBDO has been running the benchmark 'Responsible Investment by Pension Funds’. Every year, a review is undertaken on the relevancy of the assessed criteria and necessary additions are discussed with participants
of the benchmark. More detailed information about the methodology, categories and scores can be found in the appendices.

Outline of the report
The report is structured as follows: the following chapter discusses the introduction, the overall results and details how the funds have scored on the different categories; chapter three states the most important conclusions of this research; and, finally, chapter four contains VBDO’s recommendations for how pension funds can further improve.

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