• 92% have included ESG factors in their investment beliefs
• 88% want to do more about sustainability
• 52% have integrated one or more Sustainable Development Goals (SDG) goals into the ESG policy
• A lack of clear guidelines and frameworks is stopping pension funds applying ESG criteria on all the asset classes
22 Oct 2020
A survey conducted by CACEIS Nederland among 32 Dutch pension funds, in cooperation with VBDO, shows that (92%) of the respondents included Environmental, Social and Governance (ESG) factors into their investment beliefs. 88% of the pension funds indicate that they want to do more about sustainability. More than half of the pension funds (52%) have integrated one or more Sustainable Development Goals (SDG’s) into their ESG policy. These are mainly environment-related goals. The lack of clear frameworks and guidelines prevents pension funds from applying ESG criteria to all asset classes in which the funds invest.
Currently, most pension funds have no ESG objectives in their ESG policy. At the top of the board's agenda are the fund's future sustainability, its own risk self-assessment, and one or more ESG themes in the areas of climate change, human rights or biodiversity. The most common elements within the ESG policy are an exclusion policy, voting and ESG integration. Engagement is also gaining ground. Companies with some degree of product involvement in the following areas controversial weapons, tobacco, nuclear energy, military contracting and thermal coal are most excluded within the portfolio. The most common guidelines on which ESG policy is partly based are the UN Global Compact, the UN PRI and the IMVB covenant.
Lucienne de Bakker, project manager of the VBDO benchmark responsible investment by pension funds, recognizes the results from the survey. "We have just completed our own survey among pension funds, covering more than 90% of the total assets of the sector. The results that will be published next Monday show, among other things, that all the funds we surveyed do indeed include ESG factors in their investment beliefs and 84% of them formulate responsible investment targets. Unfortunately, these are often still "soft" targets, which do not always be translated into practice.
The CACEIS survey was conducted among 32 pension funds in the Netherlands with a total invested asset of approximately €775 billion. The survey also revealed that the main drivers for pension funds to work on sustainability are the intrinsic motivation of managers and the opportunities and risks for the portfolio. ESG risk management is expected to become increasingly important. Currently, 30% of respondents use scenario analyses and stress tests to identify ESG risks. At least 50% expect to do so in the future.
When it comes to information on sustainability, pension funds successively look for one or more ESG themes in the areas of, climate change, human rights or biodiversity, the impact of SDGs, and ESG risks. The most important sources of Sustainable Responsible Investing knowledge for pension funds t are their own asset managers, the fiduciary advisor and external advisors. 19% of the respondents see DNB as an important source of knowledge. Reporting on the sustainable performance of the portfolio is mostly provided by the asset manager or fiduciary manager.
85% of the interviewees report annually to participants on their sustainable investment choices.
CACEIS is an asset service banking company fully owned by CACEIS S.A., which is in turn owned by Crédit Agricole and Santander. CACEIS Bank is dedicated to the provision of services to asset managers, insurance companies, pension funds, banks, investment funds e.g. private equity and real estate funds, brokers and corporate clients.
Through offices across Europe (including, but not limited to, branches established in the Netherlands, the United Kingdom and Germany), North and South America, and Asia, CACEIS offers a broad range of services covering execution, clearing, forex, securities lending, custody, depositary, fund administration, fund distribution support, middle office outsourcing and issuer services.
With assets under custody of €3.9 trillion, assets under administration of €2.1 trillion and assets under depositary/trustee of €1.4 trillion, CACEIS is a European leader in asset servicing and one of the major players’ worldwide (figures as of 31 December 2019). More information about CACEIS can be found at www.caceis.com.