Fund Solutions

Dutch Pension Fund Draws Line in Sand for Fossil Fuels

Pledge to divest over next two years follows mounting pressure from protesters.

Pensioenfonds Zorg en Welzijn (PFZW) has announced it will stop investing in companies in the fossil fuel sector that do not commit to the Paris Agreement and ambitions outlined at COP26. Setting a 1.5°C temperature alignment target for its portfolio, the fund will only remain invested in fossil fuel companies with credible and verifiable climate transition strategies by 2024.

“If [fossil fuel companies] do make the desired transition, PFZW, as a committed and critical shareholder, will continue to encourage these companies to fulfil their role in society: actively contributing to a climate-neutral world by 2050,” said Joanne Kellermann, PFZW Chair.

Investee fossil fuel companies must further include short- and medium-term targets in their climate transition strategies or they will not be considered eligible for investment beyond 2024, PFZW warned.

During the next two years, the fund will be intensifying its shareholder dialogue with companies implementing climate transition plans. This will include using voting rights “more emphatically” in climate-related resolutions and board proposals, the fund said, noting that it will pay particular attention to attempts to introduce new Arctic extraction projects.

The Dutch pension fund, with €277.5 billion in assets, will also vote against the (re)appointment of directors that fail to contribute to the transition of the company to a sustainable future, joining with other like-minded investors to strengthen its influence.

Protests inspire change

PFZW has been under pressure from climate activists over recent months who have called for its divestment from fossil fuels.

In November 2021, 30 Extinction Rebellion and Christian Climate Action activists announced their intention to target the Netherlands’ second-largest pension fund as part of efforts to encourage pension funds to divest from fossil fuel companies. This followed a successful campaign targeting the country’s largest scheme, ABP.

This week, civil society organisations – including Amnesty International and Greenpeace – protested at PFZW’s headquarters for four days against its investments in fossil fuels.

PFZW has previously scaled back its investments in coal and tar sands. It has now updated these terms, noting that companies deriving more than 5% turnover from coal production or more than 1% from tar sands will be sold. The previous limits were 30% and 10%, respectively.

The fund has also committed to one-fifth of its investments across all asset classes being linked to the UN’s Sustainable Development Goals (SDGs) by 2025, with a particular focus on climate and healthcare.

Dutch pension fund provider PGGM, which manages assets on behalf of PFZW, has been looking for opportunities to support the energy transition and SDGs through avenues such as credit risk sharing.

“The PFZW board feels a great responsibility to use the pension contributions of our three million members in such a way that their money yields a good return and makes a concrete contribution to a liveable world,” said Kellermann. “When it comes to climate, we must bring investments in line with what Paris demands: limit global warming to 1.5°C.”

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