Power, profit, pensions and the planet – we must exercise our right to vote to ensure that powerful pension funds make more sustainable investments, says Verina Ingram.
Climate change, deforestation, biodiversity loss, food and energy insecurity, vulnerable populations in persistent poverty - it is difficult to remain optimistic about the lives of future generations. However, the economic and political systems that are at the heart of many of these problems can also be part of the solution.
Dutch pension funds manage €1,679 billion in investments, of which the General Pension Fund for Public Employees (ABP) is the largest, with assets of €531 billion. Pension funds manage (i.e. not own) the money that participants pay towards their pensions. The money is invested in shares, bonds, real estate, commodities and infrastructure. In 2021, the ABP was among the ten largest pension funds in the world, and the largest in Europe.
Pension funds therefore have a tremendous amount of power to influence established economic practices. In the Netherlands, around 3.1 million teachers, civil servants, police officers and university employees (including me) are legally obliged to accrue their pension with the ABP.
Multiple goals of pension funds
Pension funds play a role in securing the future of their participants by adding value to their deposited pension savings. They must also - and this is a newer role - respond to the long-term needs of our economy, society and environment. Pension investments are no longer just about mitigating risks and maximising investment returns: they also involve creating new, sustainable opportunities for responsible investment.
The two go hand in hand: companies with strategies that consider climate change, fair labour standards, environmentally friendly practices and strong and transparent government have greater chances of success and better long-term results.
Pension funds therefore have a legal, democratic and moral obligation to their pension holders to proactively contribute to the direction and speed of a transition to a more sustainable world. Pension funds have democratic accountability structures for reporting to their pension holders how their money is being spent, the financial returns on their investments as well as the social effects of these investments. The ABP accountability body advises and assesses ABP and the APG management regarding these investments on behalf of pension holders, employees and pensioners.
In 2020, the United Nations Conference on Trade and Development (UNCTAD) reported on opportunities for ABP to improve its sustainability policy. ABP responded saying it is committed to natural resource conservation, good corporate governance and social responsibility so that it will be “common practice for companies to have an efficient and socially responsible supply of natural resources” by 2030.
In February 2021, Mongabay, a platform for scientific articles about the environment, energy and sustainability, published a story about how ABP invests in activities that lead to the deforestation of the Amazon rainforest. Almost €200 million is still invested in Brazil’s largest meat producers - JBS, Marfrig and Minerva - which have been repeatedly linked to illegal deforestation. ABP also still invests in fossil fuels, but has promised to stop doing so, under increased social pressure.
Other pension funds and large investors have proven that change is possible. On 2 September 2021, the Dutch catering, metal and energy pension funds announced that they will withdraw their investments in fossil fuels. The Norwegian pension fund divested its investments that impacted tropical forests, as has the Swedish public pension fund.
Your voice matters
In April ABP pension holders – that’s almost one in six people in the Netherlands - had the opportunity to use their collective power in the Accountability Body election. This pension fund ‘parliament’, which is elected every four years, can help force the ABP to start investing responsibly. The newly elected members will be installed on 1 July; they will include both members who are accruing a pension with the fund and pensioners who currently receive funds. Wageningen University & Research’s Fedes van Rijn, who ran as independent candidate with a strong sustainability agenda, has just found out that she will be on the body, having received 8000 votes, 10% of the total.
I cast my vote in the hope that the members commit ABP to more sustainable investments and a future where it is not only the rate of the pension the matters, and to make sure that our planet remains living.