Climate change, deforestation, loss of biodiversity, food and energy security, vulnerable populations in perpetual poverty – it’s hard to remain optimistic about the lives of future generations. Still, it is worth remembering that it is precisely the economic and political systems that are at the root of many of these problems that may also be part of the solution.
Dutch pension funds manage 1.679 billion euros in investments, of which the Algemeen Burgerlijk Pensioenfonds (ABP) with a capital of 531 billion euros is the largest. Management of pension funds (not Owning) the money paid by participants for their pension. This money is invested in stocks, bonds, real estate, commodities and infrastructure. In 2021, ABP was one of the ten largest pension funds in the world and the largest in Europe.
Such a pension fund thus has an enormous position of power to influence established economic practices. In the Netherlands, more than 3.1 million teachers, civil servants, police officers and university staff (including me) are among those legally required to build a pension with ABP.
Not only do pension funds have a role to play in securing the future of their members by adding value to their invested pension savings, they also have – a more recent role – responding to the long-term needs of our economy, society and environment. For a long time now, pension investments are no longer just about limiting risks and maximizing investment returns, but also about creating new, sustainable opportunities and investing responsibly.
The two go hand in hand, companies with strategies that take into account climate change, adhere to fair working standards, environmentally friendly practices and with strong and transparent governance structures, have a greater chance of success and a better long-term economic return.
Pension funds therefore have not only a legal and democratic, but also a moral obligation to their pension holders to proactively contribute to the direction and speed of the transition to a sustainable world. Pension funds have democratic accountability structures to report to their pension holders, not only how this money is spent and the economic return on investment develops, but also on the social effects of these investments. The ABP Accountability Body advises and assesses the policies of ABP and the manager APG regarding these investments on behalf of participants, employees and pension recipients.
ABP has a moral obligation to contribute to a sustainable world
The United Nations Conference on Trade and Development (UNCTAD) reported in 2020 on opportunities for ABP to improve its sustainability policy. ABP says it is committed to conserving natural resources, good corporate governance and social responsibility, so that by 2030 it will be “common practice for companies to have an efficient and socially responsible supply of natural resources.”
In February 2021, Mongabay – a platform for scientific articles on environment, energy and sustainability – published a story on how ABP invests in activities leading to deforestation of the Amazon rainforest. Nearly 200 million euros still go to Brazil’s largest meat processors (JBS, Marfrig and Minerva), which have been repeatedly linked to illegal deforestation. ABP also invested in fossil energy, but under increased social pressure, the pension fund has now promised to put an end to this.
Other pension funds and major investors have proven that it is possible to change. On 2 September 2021, the Dutch Pension Funds for Hospitality, Metals and Energy announced that they would divest their investments in fossil fuels. The Norwegian pension fund has divested investments with an impact on tropical forests, as has the Swedish public pension fund.
This month, the ABP pensioners, almost every sixth resident in the Netherlands, were able to use their collective power in the election of the accountability body. This ‘parliament’ in the pension fund, which is elected for four years, can help push ABP towards responsible investment. The newly elected members will be installed on 1 July. These are both participants who build up a pension in the fund and pensioners who receive money.
I am casting my vote in the hope that members will commit to more sustainable investments and a future where it is not just about the level of pensions, but above all about the quality of life of the planet.