singaporeen
Dutch pension funds have yet to embrace SDGs

Dutch pension funds have yet to embrace SDGs

08-01-2019 | Insight

Dutch pension funds view Sustainable Development Goals (SDGs) as an investment opportunity, but have yet to fully adopt them.

Speed read

  • SDGs seen as an investment opportunity and fiduciary duty
  • Two-thirds of funds do not have a formal policy for the goals
  • Only 19% set targets to align investment activities with SDGs

That was the verdict of a report by the Dutch Association of Investors for Sustainable Development (VBDO), which analyzed the extent to which SDGs from part of investing culture in the Netherlands. It surveyed 42 institutions, representing about 95% of the Dutch pension savings market with about EUR 1.36 billion in assets, making it the most comprehensive survey of its kind in this arena.

The results showed that while all funds had heard of the SDGs, and most saw them as an investment opportunity, only a small proportion had directly allocated capital to them, or used them in their routine business dealings. Dutch funds are still ahead of the pack generally, but there is much work yet to be done to have SDGs enter the mainstream.

Launched in 2015 by the United Nations, the 17 goals range from eradicating world hunger and reducing global warming, to improving health care, technological access and educational standards in emerging markets. The SDGs have now been adopted by 198 countries, with a target of achieving all of them by 2030.

“Not achieving the SDGs could have dire consequences for pension funds,” warns the report, which was sponsored by Robeco as part of its commitment to promoting sustainability. “For example, according to the recent report by the UN Intergovernmental Panel on Climate Change, not tackling climate change will result in significant impacts on ecosystems, human health and well-being.”

Robeco Singapore Private Limited

12 Marina View 
#10-02, Asia Square Tower 2 
Singapore 018961 
Email: robecosg@robeco.com
Tel: +65 6909 6898

Contact

SDGs: an investment opportunity or business responsibility?

A major outcome of the research was that most pension funds focus on SDGs as an investment opportunity rather than a business responsibility. This is a vital distinction, since a core message of all sustainability investing is that it can be used to make better-informed investment decisions, having long moved beyond simply being an ‘ethical’ issue.

The SDGs provide a range of investment opportunities in different sectors and across all asset classes, such as in the equities of companies in low-carbon infrastructure, or in green bonds. Pension funds identified SDG 13 (climate action) as the one offering the biggest investment opportunity, particularly as it has quantifiable targets in terms of things like CO2 emissions. However, not all SDGs are perceived to be investible, such as SDG 10 (reduced inequalities) and SDG 16 (peace, justice and strong institutions).

Viewing them as a business responsibility doesn’t necessarily rule them out of the investment process though, as the positive or negative impacts can be used for negative screening, or as part of ESG integration. For example, when investing in infrastructure under the sea, a fund may consider the effect on SDG 14 (life below water). The goal that investors were most likely to view as being a business responsibility was SDG 3 (good health and well-being), while SDG 1 (no poverty) was not seen as a business responsibility by any pension fund.

Smarter, louder, harder!

Setting out the report’s call-to-arms to “be smarter, speak louder, push harder” in achieving more widespread adoption of the goals, Herman Mulder, chairman of the SDG Charter in the Netherlands, believes the issue is a moral compass for investors.

“Clients of pension funds have a dual interest: enjoying a decent pension, while living in a prosperous, just and peaceful society,” he says. “The fiduciary duty of pension funds should not only relate to the direct best interests of their primary beneficiaries, but also to contributing, within their roles and resources, to society-at-large and, hence, more indirectly benefitting such clients.”

“The pension sector has a duty and an opportunity to be a trusted steward and facilitator of sustainable, shared value creation, by analysis and funding, for the world we all want and deserve!”

Board involvement boosts incorporation

The report found that an effective responsible investment policy relies heavily on the involvement of the board. When the board shows a serious interest, the discussion may lead to incorporation of the SDGs, though this would require the discussion to be extended to include the asset manager.

Some of the other key takeaways were:

  • Most pension funds consider their fiduciary duty as the most important motivation for adopting the SDGs. Other important drivers are reputation and ethical considerations. The relatively low score for financial performance as a driver indicates that it is unclear to pension funds if SDG investments also contribute to better financial performance.
  • SDGs are high on the agenda of pension fund boards, with 48% discussing them more than once a year, 35% once a year, and only 17% not at all. However, only half of the funds went on to discuss SDGs with their asset managers and fewer than one third took them into account when appointing asset managers.
  • Two-thirds of the funds surveyed do not have a formal policy that adopts the SDGs. Some 18% of funds do address the goals in investment opportunities, while 8% touch upon them in a more general sense.
  • Only 19% of pension funds set targets to align investment activities with the SDGs; for example, one fund formulated a clear target of allocating 10% to sustainable development. Another 19% are currently developing such targets, but 62% do not have any targets in place. This is partly due to the non-investible nature of some of the SDGs, and the fact that some of the 169 targets are qualitative rather than quantitative in nature.

Several obstacles remain

Several obstacles remain that prevent pension funds from fully embracing the SDGs, the report said. Reasons given were a lack of capacity at the fund, particularly given the research needed, and a lack of visibility on what would be the final impact on investment returns. Pension funds also complained about a lack of know-how internally on the concept of SDGs, and a lack of added value for the more subjective ones.

More encouraging was the fact that 13 (out of 42) pension funds mentioned that they are currently working on adopting the SDGs. Overall, implementing the SDGs was considered to be complex, and further research was viewed as being needed. Subsequently, some pension funds first wanted to explore the possibilities of measuring the SDGs before adopting them into their policies.

Important information

This information is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation.
The contents of this document have not been reviewed by the Monetary Authority of Singapore (“MAS”). Robeco Singapore Private Limited holds a capital markets services license for fund management issued by the MAS and is subject to certain clientele restrictions under such license.
An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

Subjects related to this article are:
Logo

Important Information

Warning/Important note: This website contains information which is only available to qualified investors as defined below. If you are not a qualified investor, please click “I Disagree” to leave the website.

By clicking on "I agree", I declare that: 

  • I am a qualified investor as defined under 1
  • I have read and understood the Terms and Conditions and Disclaimers as described under 2

1 - This website may only be accessed directly or indirectly by the following persons in Singapore:

1) “institutional investor” under section 304 of the Securities and Futures Act (Cap.289)(“SFA”), which means:
(i) the Government; (ii) a statutory board as may be prescribed by regulations made under section 341 of the SFA; (iii) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is (A) to manage its own funds; (B) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or (C) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; (iv) any entity (A) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and (B) whose funds are managed by an entity mentioned in sub-paragraph (iii); (v) a central bank in a jurisdiction other than Singapore; (vi) a central government in a country other than Singapore; (vii) an agency (of a central government in a country other than Singapore) that is incorporated or established in a country other than Singapore; (viii) a multilateral agency, international organisation or supranational agency as may be prescribed by regulations made under section 341 of the SFA; (ix) a bank that is licensed under the Banking Act (Cap.19); (x) a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap.186); (xi) a finance company that is licensed under the Finance Companies Act (Cap.108); (xii) a company or co-operative society that is licensed under the Insurance Act (Cap.142) to carry on insurance business in Singapore; (xiii) a company licensed under the Trust Companies Act (Cap.336); (xiv) a holder of a capital markets services licence; (xv) an approved exchange; (xvi) a recognised market operator; (xvii) an approved clearing house; (xviii) a recognised clearing house; (xix) a licensed trade repository; (xx) a licensed foreign trade repository; (xxi) an approved holding company; (xxii) a Depository as defined in section 81SF of the SFA; (xxiii) an entity or a trust formed or incorporated in a jurisdiction other than Singapore, which is regulated for the carrying on of any financial activity in that jurisdiction by a public authority of that jurisdiction that exercises a function that corresponds to a regulatory function of the Authority under this Act, the Banking Act (Cap.19), the Finance Companies Act (Cap.108), the Monetary Authority of Singapore Act (Cap.186), the Insurance Act (Cap.142), the Trust Companies Act (Cap.336) or such other Act as may be prescribed by regulations made under section 341 of the SFA; (xxiv) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere; (xxv) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors; (xxvi) the trustee of such trust as the Authority may prescribe, when acting in that capacity; or; (xxvii) such other person as the Authority may prescribe.

2) “relevant person” under section 305(1) of the SFA, which means:
(i) An accredited investor; (ii) a corporation the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; (iii) a trustee of a trust the sole purpose of which is to hold investments and each beneficiary of which is an individual who is an accredited investor; (iv) an officer or equivalent person of the person making the offer (such person being an entity) or a spouse, parent, brother, sister, son or daughter of that officer or equivalent person; or (v) a spouse, parent, brother, sister, son or daughter of the person making the offer (such person being an individual).

3) any person who acquires the units [in a collective investment scheme] as principal if the offer is on terms that the units may only be required at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of units in a collective investment scheme, securities, securities-based derivatives contracts or other assets, and if the following condition is satisfied: (i) the offer is not accompanied by an advertisement making an offer or calling attention to the offer or intended offer; (ii) no selling or promotional expenses are paid or incurred in connection with the offer other than those incurred for administrative or professional services, or by way of commission or fee for services rendered by any of the persons specified in section 302B(1)(d)(i) to (vi) of the SFA; and (iii) no prospectus in respect of the offer has been registered by the Authority or, where a prospectus has been registered (A) the prospectus has eAccxpired pursuant to section 299 of the SFA; or (B) the person making the offer has before making the offer 1. informed the Authority by notice in writing of its intent to make the offer in reliance on the exemption under this subsection; and 2. taken reasonable steps to inform in writing the person to whom the offer is made that the offer is made in reliance on the exemption under this subsection.

4) Or otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

If you are not any of the types of persons described above, you are not authorized to enter this website and you should leave this website immediately.

2 Terms and Conditions
You acknowledge that you have read these Terms and Conditions (“Terms”) prior to accessing the website located at www.robeco.com/sg (“Website”) and you agree to be bound by the Terms.  If you do not agree to all of the Terms, you are not an authorised user and you should not use the Website. The Website is owned by Robeco Singapore Private Limited (company registration number: UEN. 201541306Z), which is licensed by the Monetary Authority of Singapore (“MAS”) pursuant to the Securities and Futures Act (Cap.289) (“SFA”) of Singapore, and is managed by Robeco Singapore Private Limited and/or its affiliates (collectively, as “Robeco”). The Website is intended for and should be accessed by institutional investors or accredited investors (as defined under Section 4A of the SFA) of Singapore.  The Website is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the Robeco to any registration or licensing requirement within such jurisdiction.  It is your responsibility to observe all applicable laws, rules and regulations of any relevant jurisdiction. The content contained in the Website is owned by Robeco and/or its information providers and is protected by applicable copyrights, trademarks, service marks, and/or other intellectual property rights.  You may not copy, distribute, modify, post, frame or link the Website, including any text, graphics, video, audio, software code, user interface, design or logos.  You may not distribute, modify, transmit, reuse, repost, or use the content of the Website for public or commercial use, including all text, images, audio and/or video.  Robeco may terminate your access to the Website for any reason, without prior notice. Neither Robeco, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from the access of the Website.  You agree to indemnity and hold Robeco, its associates, directors, officers or employees harmless against any and all claims, losses, liability, costs and expenses arising from your use of the Website due to violation of the Terms. Robeco reserves the right to change, modify, add or remove any parts of the Terms at any time and for any reason.  The Terms shall deemed to be effective immediately upon posting. The Terms shall be governed by, and shall be construed in accordance with, the law of Singapore.

Disclaimers
The Website has not been reviewed by the MAS. Accordingly, the Website may not be accessed directly or indirectly to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, (ii) to a relevant person pursuant to Section 305(1), or any person pursuant to Section 305(2), and in accordance with the conditions specified in Section 305, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. 

Nothing in the Website constitutes tax, accounting, regulatory, legal or investment advice.  The Website is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation or for the purpose of soliciting any action in relation to Robeco’s businesses, or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer and solicitation. Any reproduction or distribution of information from the Website, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited.  By accessing to the Website, you agree to the foregoing.  

The funds referred to in the Website are for information only.  It is not a recommendation or investment advice, nor does it mean the funds is suitable for all investors.  The contents of the website is not reviewed by the MAS.  Any decision to participate in the funds should be made only after reviewing the sections regarding investment considerations, conflicts of interest, risk factors and the relevant Singapore selling restrictions.  You should consult your professional adviser if you are in doubt about the stringent restrictions applicable to the use of the Website, regulatory status of the funds, applicable regulatory protection, associated risks and suitability of the funds to your objectives.

Any decisions made based on the information contained in the Website are the sole responsibility of yours.  Any investments made or to be made shall be with your independent analyses based on your financial situation and objectives.  The investments and strategies contained in the Website may not be suitable for all investors and are not guaranteed by Robeco.  

Investment involves risks and may lose value.  Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future.  The value of your investments may fluctuate.  Past performance is no indication of current or future performance.  The Website may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies and such projection or forecast is not indicative of the future.  The information contained in the Website, including any data, projections and underlying assumptions are based upon certain assumptions, management forecasts and analysis of information available on an “as is” basis and without warranties of any kind, whether express or implied, and reflects prevailing conditions and Robeco’s views as of the date published or indicated, and maybe superseded by subsequent events or for other reasons.  The information contained in the Website are accordingly subject to change at any time without notice and Robeco are under no obligation to notify you of any of these changes.  Robeco expressly disclaims all liability for errors and omissions in the information presented in the Website and for the use or interpretation by others of information contained in the Website.

Robeco Singapore Private Limited holds a capital markets services licence for fund management issued by the MAS and is subject to certain clientele restrictions under such licence.  An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

I Disagree