Pension funds and responsible investment: let participants decide

[IMAGE 0]Steven van Weyenberg, Member of the Dutch Parliament for D66

There are a number of considerable benefits to the Dutch pension system. In the Netherlands, poverty amongst the elderly is very low. Pension coverage is high: nearly every person living in The Netherlands is entitled to a ‘base’ state pension (AOW), while close to 90 percent of all employees save through a capital funded pension fund that is linked to the sector in which they work or the employer. One of the downsides is the lack of choice: people can’t decide for themselves what they do or don’t want to invest in. In recent years, more and more people have shown a willingness to make a difference through their investment decisions. A lot of Dutch people for instance decided to switch to a sustainable bank. To help these individuals make a bigger difference, I feel that we should increase the influence of participants on the responsible investment decisions their pension fund makes. I believe that corporate benchmarks, such as the corporate SDG (Sustainable Development Goals) benchmarks developed by the World Benchmarking Alliance (WBA), can help bring about more clarity on the role of private sector in sustainable development. Access to publicly available benchmarks will not only guide but increase the influence of participants to drive responsible investment within pension funds.

Because most people are obligated to contribute a sizeable portion of their income to the (mandated) pension fund, a huge amount of capital is accumulated in Dutch pension funds: around 1400 billion euro’s, more than 200% of GDP. For most people, their pension fund manages their biggest financial asset. People are obligated to save up to 20% of their income, but have no say in investment decisions the fund makes on their behalf. Research shows that people want a bigger say, and want their pension funds to make investment decisions that not only benefits their own future but also contributes to a better future for the world as a whole. Take for example investments in tobacco companies. Four in five participants doesn’t want their pension fund to invest in tobacco while 4 in 5 pension funds does indeed invest in tobacco. Movements like ABP Fossielvrij and TabakNee, that unite participants that want their fund to divest from certain industries, show that there is a clear need to increase the influence of participants.

A new bill, an ‘initiatiefwet’, being tabled in the Dutch Parliament will endeavour to tackle this challenge. If the bill is passed, it will increase the influence of the accountability body of pension funds. Most pension funds have one that represents the interests of participants and employers. Participants can also call an election for the accountability body. Through this bill, accountability bodies get the right of approval for the exclusion policy of the fund and pension funds are mandated to consult the accountability body on the responsible investment policy. Corporate benchmarks, such as the corporate SDG-benchmarks developed and housed by the WBA, give participants objective information about how companies perform related to sustainability. This can help to guide and support participants in their decision making. I believe that this will help steer pension funds in the right direction, while simultaneously giving participants more to say about their own money.