Interview
This is how responsible our pension investments are
More and more employers believe it is important that their employees’ pension money is invested responsibly. But what do we mean by responsible pension investments? And what benchmarks do we use to determine responsibility? Nathalie van Toren, Responsible Investment Manager at NN Group, brings you up to speed.
At Nationale-Nederlanden, we invest our clients’ pension premiums responsibly. ‘Two key components of our responsible investment policy are the integration of ESG criteria and active share ownership,’ Nathalie says.
What does this mean in practical terms?
ESG stands for Environmental, Social and Governance. This is a set of environmental, social and governance criteria that companies must meet. Think about reducing carbon emissions, combating climate change and/or good working conditions for employees, diversity or fair remuneration policies.
‘It’s important to talk to companies about their ESG performance regularly (Dutch only),’ says Nathalie. ‘Consider a company’s sustainability policy and strategy. What are the objectives? What progress are companies making? And what shows that they’re performing better than before?’
‘We also hold companies to account for the things that don’t go well,’ she continues. ‘The idea is that they come up with measures for improvement. In this way, we encourage them to do business more and more responsibly.’
Voting rights
In addition to ESG conversations, voting rights at shareholder meetings are an important part of the responsible investment strategy. Nathalie: ‘At shareholder meetings, for example, we vote on the appointment of directors. We also ask questions. This is how we let people know what we think is important, for example when it comes to sound governance or a company’s sustainability policy.’
‘More and more people are realising that they can contribute to a sustainable world through their pensions.’
Active role
Society also demands such an active role from pension insurers and other insurance firms, notes Nathalie. ‘More and more people are realising that they can contribute to a sustainable world through their pensions. As a major financial institution, we want to encourage the transition to a sustainable economy. That’s why we’re closely involved in the companies we invest in. We encourage them to do business more and more responsibly. Companies that do this well also tend to achieve better returns in the long run.’
Three different benchmarks
There are several benchmarks (comparison surveys) that allow you to compare insurers (including pension insurers). Nathalie explains three key benchmarks.
1. International sustainability indexes
‘For a start, we’re included in two major international sustainability indexes,’ Nathalie proudly tells us. Institutional investors use these indexes to build mutual funds.
Dow Jones Sustainability Index (DJSI)
‘We’re listed as a Dutch insurer in the Dow Jones Sustainability World Index,’ says Nathalie. ‘With a score of 80 out of 100, we are among the top 10% of our industry worldwide.’ And that is quite an achievement. Indeed, the Dow Jones Sustainability Index (DJSI) is one of the world’s leading sustainability indexes.
FTSE4Good
‘In addition, we’re included in the FTSE4Good Index Series,’ Nathalie continues. ‘This index measures the performance of companies based on ESG criteria. We score a 4.1 out of 5. That’s quite high. It’s nice that our contribution is noted in these indexes, but it’s also a professional confirmation that we’re on the right track with our strategy and results.’
2. International ESG assessments
In addition to international benchmarks, there are international agencies that assess companies’ ESG performance. Nathalie: ‘They review many of our activities, from data privacy to responsible investment and from our carbon emissions to diversity. The results of these surveys confirm the positive picture that we’re on the right track.’
Sustainalytics and MSCI
For example, research company Sustainalytics surveyed 138 insurers in 2022. ‘That earned us an eighth place,’ says Nathalie. Sustainalytics conducted ‘ESG Risk Ratings’ to see whether companies were at risk with regard to ESG issues.
Carbon Disclosure Project (CDP)
Another rating is that of non-profit organisation CDP. ‘They examine our reports for climate risks and efforts to reduce carbon emissions,’ Nathalie explains. ‘The ratings run from A to D, and we score a B rating.’
3. Dutch benchmarks
Besides international surveys, there are also Dutch benchmarks that focus specifically on responsible investment. How do they rate us?
VBDO Benchmark
The VBDO Benchmark Responsible Investment by Insurers conducts research among the 30 largest insurers in the Netherlands. What does their responsible investment policy look like? How do they put that into practice? What results do they achieve? And how transparent are they about their policies and results?
Nathalie: ‘In 2021, we rose from third to second place in the benchmark. We’re extremely happy with that.’
Fair Insurance Guide
Another well-known survey is the Fair Insurance Guide. ‘This is an assessment of the investment policies of Dutch insurers, based on the sustainability themes and sectors they invest in,’ Nathalie explains.
This benchmark shows different results. ‘On themes like human rights, labour rights and corruption, we score well,’ says Nathalie. ‘But on issues such as fisheries and animal welfare, we currently score lower.’