Baseline Assessment by the Monitoring Committee of the Dutch Pension Funds Agreement on Responsible Investment

The Monitoring Committee of the Dutch Pension Funds Agreement on Responsible Investment has issued a report indicating the results of the baseline assessment, i.e. the state of affairs at the start of the Agreement. The Steering Committee has responded by publishing an ‘Appreciation’ addressing the recommendations set out in the report.
© Shutterstock

Publication of entire report

In the Agreement, Participating Pension Funds, the Dutch government, trade unions and NGOs undertake to incorporate the OECD Guidelines and United Nations Guiding Principles on Business and Human Rights (UNGPs) into the policy and practice of pension funds. The Participating Pension Funds – a total of almost 80, accounting for about 90 percent of the total assets managed by pension funds in the Netherlands – and other parties involved have completed the baseline assessment. In the interest of transparency, the parties have decided to publish the entire report.

There will be follow-up assessments in the coming years to monitor progress. The baseline assessment will also be used to set the KPI target percentages.

Focus on key concepts

In its ‘Appreciation’, the Steering Committee acknowledges the value of the report and responds to the recommendations. Below are a few examples of the findings and recommendations (and the Steering Committee’s responses to them).

  • Most of the Participating Pension Funds have an investment policy based on responsible business conduct, and most also apply that policy. Nevertheless, they differ significantly in terms of policy completeness and the level of detail. The OECD Guidelines for due diligence require the identification of any potential or actual adverse impacts of investments on stakeholders, for example employees or local communities. This appears to be an unfamiliar concept for investors; until now, their ESG policy has focused primarily on potential adverse impacts on the financial value of investments. The Steering Committee acknowledges that this is the case. Participating Pension Funds have until the end of 2020 to amend their policy in line with the provisions of the Agreement and can use the various instruments available for this purpose. The Steering Committee expects that the instruments under development in the first year of the Agreement will be helpful in this respect.
  • The Monitoring Committee has noted some confusion regarding the meaning of key concepts such as ‘due diligence’ and ‘long-term value creation’. It is essential that the Participating Pension Funds, executive board support offices, members and other stakeholders become better acquainted with the OECD Guidelines/UNGPs. The Steering Committee acknowledges the importance of this issue and will ensure that it receives proper attention in the years ahead.
  • The report also notes that Participating Pension Funds lack a policy describing how they deal with the implementation of their own ESG policy in outsourcing relationships. Given the early stage of the Agreement, the Steering Committee considers that this observation was to be anticipated. Pension funds in fact work with a wide variety of pension administrators. The ongoing development of this policy will be a focus of attention over the coming years.
  • With regard to reporting and transparency, the Steering Committee agrees with the Monitoring Committee’s recommendation that pension funds’ ESG policy decisions – including the implementation of the OECD Guidelines and the UNGPs – should be made transparent for members. Doing so is essential if pension funds are to win the support of their members for their specific ESG policy.

Objective of the Agreement

The parties’ objective in drawing up this Agreement is to prevent, mitigate and/or remediate (or provide access to remediation concerning) potential and actual adverse impacts on society and the environment stemming from investments made by pension funds. The Agreement is intended to fulfil the expectations set for pension funds under the UNGPs and OECD Guidelines, with the OECD guidance ‘Responsible business conduct for institutional investors’ providing support for implementation.