We have updated the ESG (Environmental, Social, and Governance) investment policy. This comes because the world and our priorities have changed, and our policies were not always clear to our members. Moreover, the way we invest is changing, as we say goodbye to shareholdings. Carmen Floristan, Chair of the Pension Fund Investment Committee, and Otto Berbee, Board Member for pensioners, explain what’s changed.
‘Making improvements at the right time’
Carmen: ‘There were two reasons for updating the sustainability policy. Firstly, we wanted to make the policy easier to read. It’s important for the policy to be clear to employers, current and former members, pensioners, and our regulators. For the board, these updates come at the right time. Regulators, including De Nederlandsche Bank (DNB), are increasingly looking at how the ESG policy has been implemented. Secondly, we want to look at every step in our investment process with our ESG hat on. This means that we take human beings, the environment, and good governance into account. We set up an ESG working group to review our sustainability policy, which came up with the following actions:
- ESG training for the board
- questionnaire to the board on how the sustainability policy has been implemented and how it could be adjusted
- financial calculations for the sustainability scenarios
- review of the ESG checklist sent to the external investment managers.
At the same time, the fund board is changing the way in which investments are made. We are moving more and more towards investments with fixed interest rates and a fixed maturity (bonds). That means we are phasing out shareholdings. All this is now coming together nicely in our updated policy.’
‘Setting a good example as the parent company’
Otto: ‘We are in the middle of a huge energy transition. Reducing CO2 emissions is one part of this. DOW is a large company with a forward-looking policy in this field. As a pension fund, we are doing our duty by investing in a sustainable way. For example, we invest mainly in countries that have signed up to the Paris climate agreement and score well on the United Nations sustainability principles.’
‘A well thought-out approach’
Carmen: ‘The new version of the ESG investment policy focuses on integration, i.e. ESG assessments and risks are included in the investment analysis. Our fund is relatively small and subcontracts to external investment managers. They take ESG information into account when deciding how to invest the money from our fund. This approach leads to investments with a low ESG-risk. In this way, the fund not only ensures solid investments, but also contributes to a better world and society. In addition, most of our investment managers have signed the UN’s sustainability principles.’
‘A well-protected policy funding ratio’
Otto: ‘The policy funding ratio indicates how healthy our pension fund is. It shows the extent to which we can meet our payment obligations in relation to our assets. Our research showed that our policy funding ratio is also well protected by the new policy. The ESG risks are well covered and even in the event of a disappointing stock market climate, the coverage ratio remains at a sufficient level. This means a nice, secure pension for our current and former members as well as our pensioners. So, it’s very important.’
‘Ready to reveal the new policy plan’
Otto: ‘Our new, updated policy is now ready. The board has approved it, partly thanks to the sound approach of the ESG working group: from planning, through implementation, to completion. Now, it’s time to share it with the Supervisory Board, the Accountability Body, and the sponsor (Dow). The ESG policy plan will be communicated through our website, so we can then enter into further dialogue with our members.’
Next steps
Carmen: ‘The ESG working group and the fund board continue to be guided by the ESG priorities and rules (DNB and EEC). We are also working on monitoring ESG figures, so we know how well our fund is doing in terms of ESG. We are evaluating how well ESG reporting systems are working for our fund and suit our future reporting requirements. The fund will then review the ESG policy annually and revise it if appropriate.’