PDN has a duty to continue to provide good pensions, in whatever circumstances the world finds itself. We invest our members’ pension contributions in a responsible way to ensure that we can offer attractive pensions, now and in the future and we take our social responsibility in this too. Numerous scientific studies have strengthened our conviction that sustainability does not need to be at the expense of return on investments. On the contrary, we can take more well-considered investment decisions by incorporating information about people, the environment, and good corporate governance in our policy and implementation framework. Certainly because we are investing for the long term.
Objectives achieved in 2020
Together with our partners and our administrative organization DSM Pension Services (DPS), we continue to make efforts for sustainability and develop initiatives. We are measuring our sustainability progress using performance indicators in which we impose a minimum standard on ourselves per performance indicator. We aim to continuously improve our sustainability performance. In 2020, we achieved all the objectives we imposed on ourselves for each performance indicator. We produced a report of our most important results with respect to sustainability in our annual sustainability report (available on the website under Downloads)*.
Sustainability initiatives taken during 2020 include:
Reducing CO2 emissions
Historic commitments were made with respect to sustainability and combatting climate change in 2020. Companies, governments, and investors endorsed the idea of ‘net zero’: an economy that, by 2050, no longer emits more CO2 than it removes from the atmosphere. This global ‘net zero’ target can be considered as a prelude to an enormous overhaul of the economy.
In 2018, PDN signed the Montréal Pledge in which institutions from around the globe commit to publishing their carbon footprint and formulating policy on this topic. One of our external parties on sustainable investments, Sustainalytics, also conducted a baseline measurement for us. We did this to measure the carbon footprint in parts of our investment portfolio. We then decided to choose other investments that would reduce the carbon footprint of our investments by 20% over a period of three years. We achieved this target at the end of 2020. We realized a 40% reduction within the American share portfolio and a 22% reduction within the European share portfolio compared with the benchmark.
Influencing companies in which we invest
Another way PDN exerts its influence on sustainability is by using engagement and by using its votes at meetings of shareholders. We will be using our engagement policy and voting policy in 2020 to actively influence those companies in which we invest to include sustainability in their governance. We will engage in discussion with these companies to realize positive and structural behavioral change. This influence is, of course, more effective if we do so with others, based on clearly defined priorities.
International Social Responsible Investing
PDN signed the Internationaal Maatschappelijk Verantwoord Beleggen covenant (IMVB, International Social Responsible Investing) in 2018. We have also incorporated the Organization for Economic Cooperation and Development (OECD) guidelines and the UN Guiding Principles in our sustainability policy, in our outsourcing to service providers and in our monitoring and reporting on this.
In the context of the IMVB covenant, we are focusing on certain societal developments that are important to our members and have been identified as high risk for our investment portfolio. Against this background, we highlighted two sustainability risks for which additional attention is needed: climate change and controversial weapons.
We reinvested in ‘green bonds’ in 2020. These are obligations with which investors invest in sustainable projects. In 2020, PDN’s investments included the first German green state bond. The green bond investments we made in 2020 are in addition to the existing green bonds in which PDN already invested, including the World Bank and the Dutch State.
For PDN, sustainable investment also means investing in companies that work to make products more sustainable and in doing so contribute to a more sustainable world. In this context, PDN made a green bond investment in Fertiberia last year. This company is engaged in developing new fertilizers that require less water and are more environmentally friendly in use. This company also aims to be the first fertilizer manufacturer in Europe that does not produce emissions and is also the first to use green hydrogen.
We invest in such a way that our investments reflect our own standards and values. Companies that conduct themselves in a manner not compatible with the UN Global Compact's Ten Principles are excluded from our investment. The Ten Principles are sub-divided into four main themes: Human rights, labor law, environment, and fighting corruption.
In addition to excluding companies that demonstrate behavior that is not compatible with our standards and values we also exclude companies involved in the production of controversial weapons such as cluster bombs, land mines, chemical and biological weapons, depleted uranium ammunition, white phosphorus bombs, and nuclear weapons. Along with the manufacturers of such weapons, the vendors supplying products that are vital to their production (key suppliers) are excluded from investment. Countries that do not adhere to international treaties or which are under sanction by the UN, EU, or the Dutch government are also excluded from investment. In most cases, the sanctions are related to human rights, arms proliferation, and democratic rights.
For PDN, 2021 is all about sustainability. We are reformulating our sustainability ambition and starting points for the coming years and will use these to further develop our sustainability policy. We are translating the policy into performance indicators and integrating these in our investment categories. In doing so, we remain very conscious of our role in society, but also of our important objective of providing a good pension for our members. This is a tremendous responsibility, certainly in the current economic climate. Additionally, it is important that our members can enjoy their pensions in a world that is livable for everyone.
*Read more about sustainability at PDN? Check out our website, under ‘Downloads’. We will be publishing the 2020 sustainability report there in early June.