In the 2021 Sustainability Report, PDN explains its sustainability policy and accounts for the most significant results over the reporting year 2021. The complete sustainability report (PDF) can be found on the PDN’s website under downloads and it is also included in the 2021 annual report.
For PDN, it’s not only important that our members can enjoy a good retirement. We also want them to be able to do that in a world that is livable for everyone. We have observed that companies and countries that treat people, society, and the environment well are usually better managed, achieve better results, and have a better chance of survival.
Our sustainability policy currently focuses specifically on three themes:
These themes are linked to the United Nation’s four sustainable development objectives: the Sustainable Development Goals (SDGs). We are focusing more specifically on:
These goals match perfectly with DSM’s focus areas. We are particularly committed to making a positive contribution to these four focus SDGs through our sustainability policy.
ESG stands for Environment, Social, and Governance. PDN firmly believes that taking ESG criteria into account when making investment decisions leads to better results and/or better management of risks in the long term.
We also include our CO2 policy in the Environment factor. In addition to having a good understanding of the portfolio’s carbon emissions by measuring them, we also want to achieve a reduction in the carbon emissions of our investment portfolio by means of a CO2 reduction target (in terms of carbon intensity). This means we are not only committed to helping combat global warming, but are also making the investment portfolio more resilient to certain risks, such as climate-related risks.
In 2018, PDN set a CO2 reduction target for the American and European share portfolios: the target was to achieve a 20% reduction in the level of CO2 in these two portfolios, as measured at the end of 2017, by the end of 2020. This target has been achieved. In 2021, we set a new CO2 reduction target to further reduce the CO2 emissions of our investment portfolio; we will work towards this target as of 2022. With this new CO2 reduction target, PDN is aiming to achieve a CO2 reduction of 55% by 2030 compared with the benchmark and carbon data as at 2016 for the investment categories shares, investment grade credits, and high yield US, and a reduction to net zero (100% reduction) by 2050 (based on WACI Scope 1 and Scope 2 emission numbers). From 2022 onwards, we will start steering towards this new target and monitor our asset managers accordingly.
Outcome of the objectives for CO2 Reduction
We use Impact Investments to help guide us in achieving both attractive financial returns and social objectives. Our investment decisions are based on the UN’s seventeen sustainable development goals.
In order to increase our impact, in 2021 we decided that we wanted our impact investments to focus on making a positive contribution in helping create a stable and resilient climate for everyone worldwide, as well as good health and well-being for people of all ages.
Examples of impact Investments and sustainable investments
In 2021, we expanded our infrastructure portfolio with an investment in Mirova’s renewable energy fund, the MET5 fund. Mirova is an asset manager that operates according to the highest standards in the field of sustainability and is particularly committed to providing affordable and clean energy as well as making a positive contribution to the climate. Investment in the Northern Horizon Healthcare Real Estate Fund. This fund is committed to creating safe and affordable housing with good basic services.
We also pay attention to sustainability as part of our mortgage investments. Consumers receive support if they have payment problems, and affordable housing is financed through mortgages with a National Mortgage Guarantee. Consumers are also actively contacted if their homes are very energy inefficient. This not only saves the consumer money, but it also makes a positive contribution to the climate. By way of a sustainability deposit, a consumer can borrow a percentage of the value of their home to improve the sustainability of their home. In addition, following the floods in the Netherlands during the summer of 2021, our mortgage provider Munt shared its knowledge and experience of flooding risks.
The total volume of impact investments was €246 million at the end of 2021, an increase of €28 million compared with the end of 2020.
Outcome of the objectives for Impact Investments
We want our investments to have as much positive impact as possible and preferably as little negative impact on the world as possible. We encourage companies to effect positive developments in the field of social issues and sustainability.
We have outsourced engagement to a company that specializes in this, Columbia Threadneedle Investments. Columbia Threadneedle Investments acts as an engagement party on behalf of a number of institutional investors. By working together, we increase our impact.
In 2021, Columbia Threadneedle Investments addressed 209 companies in eighteen countries within the share portfolio. A total of 113 milestones have been achieved. Within the corporate bond portfolios, dialogue was conducted with 88 companies in thirteen countries. A total of 62 milestones have been achieved. In addition to company-specific engagements, Columbia Threadneedle Investments has made the following thematic engagements: diversity of Executive Boards, balanced remuneration policy, auditor accountability, environmental and social factors of climate risk, and Accountability of Executive Boards.
Climate Action 100+
PDN, through Columbia Threadneedle Investments, is a member of Climate Action 100+, along with other financial institutions. Climate Action 100+ is an initiative set up by a group of investors to ensure that the world’s largest emitters of greenhouse gases are taking the necessary action to address climate change. More than 615 investors worldwide, responsible for more than $65 trillion in assets under management, engage with companies in improving climate change policies, reducing emissions, and improving climate-related reporting. In 2021, Climate Action 100+ achieved significant progress among participating companies. Over 43% of the 160 participating companies have set themselves the target of achieving net zero emissions by 2050 or earlier.
Phasing Out Coal
There was mixed progress on phasing out coal in 2021. The large diversified mining companies did make several major commitments. Investments in clean energy are becoming increasingly financially attractive. This has driven the electricity sector to invest more and more in clean energy and storage. Many European and American companies in the sector have set themselves net zero targets. PDN’s engagement efforts, undertaken by Columbia Threadneedle Investments on PDN’s behalf, focus in particular on the United States, China, and India as major coal users.
Sustainable Food Systems
The impact of agriculture on biodiversity is becoming increasingly severe, especially in some of the world’s most vulnerable habitats. Since the start of the engagement program, Columbia Threadneedle Investments has approached 52 companies to promote more sustainable practices in food production and consumption. Since then, Columbia Threadneedle Investments has conducted a total of 103 engagement activities on issues such as deforestation, climate adaptation strategies, water management, and alternative proteins. However, most companies are still struggling to implement changes that would significantly combat environmental degradation.
Expansion of the Engagement Policy
In 2021, we increased the number of companies with which we conduct engagement in view of our desire to step up our ambitions through engagement. We now conduct engagement with respect to all of our share and corporate bond portfolios. In 2021, we also decided that we wanted to use engagement to promote positive change with respect to our four focus SDGs. Our goal is for at least 25% of the total number of engagements to focus on SDGs 3, 7, 12, and 13. We also want to reach a milestone with at least 50% of the total number of engagements each a year.
Outcome of the objectives for Engagement
In addition to engagement, PDN sees voting as the most effective way to influence companies to change their behavior and thereby contribute to curbing negative impacts, and increasing positive impacts. We therefore believe that exercising our right to vote is particularly important.
PDN voted at nineteen meetings in 2021; this concerned all shareholder meetings of Dutch listed companies. A total of 204 agenda items were discussed. PDN voted against fourteen agenda items. These proposals primarily related to anti-takeover measures, remuneration policies, and Director appointments.
Every quarter, we publish on our website the votes made on behalf of PDN in general meetings of the companies in which we invest. These are published per individual company and per voting point.
Expansion of the Voting Policy
In 2021, we decided that — in order to fully leverage the influence we can exert by voting at shareholders’ meetings — we would not only vote at the shareholders’ meetings of Dutch listed companies in which we invest, but also vote at the shareholders’ meetings of all listed companies in which we invest worldwide.
Outcome of the objectives for the Voting Policy
Unfortunately, it is not always possible to use engagement and voting to dramatically reduce our negative impact. Therefore, we exclude some companies and countries from our investments. We set clear limits on investments based on our identity and standards, and values. This is not merely a matter of balancing returns against risk, but a hard bottom line. We do this by not investing in companies that are engaged in serious and structural violations of the Ten Principles of the United Nations Global Compact. Furthermore, we do not invest in producers and key suppliers of controversial weapons (legal and other), and government bonds of countries that are subject to sanctions by the UN Security Council, the Netherlands, and/or the European Union.
At the end of 2021, PDN’s list of exclusions comprised a total of 139 companies and fourteen countries in the investment universe. This represents an increase of 47 companies and roughly the same number of countries compared with the end of 2020.
Expansion of the Exclusion Policy
In 2021, we decided that we no longer wish to invest in companies that derive at least 25% of their turnover from coal and tar sands mining. This limits our allocation to the most polluting fossil fuels. We will continue to invest in oil and gas companies provided the companies in question are willing to make the transition and take concrete steps. PDN believes that continuing to invest in these companies is necessary in order to realize the energy transition. We are committed to using engagement and voting to encourage companies in this sector to phase out their dependence on fossil fuels, and move to other, more sustainable sources of energy. Since smoking seriously damages people’s health and we are unable to contribute to making tobacco less harmful to people through engagement and voting, we have also decided that we will no longer invest in tobacco products.
Some examples of companies excluded in 2021:
Outcome of the objectives for Exclusion
We believe it is important that we are transparent about the actions we have taken and the achievements we have had in the field of sustainability. To this end, we publish a Sustainability Report every year. In this report, we indicate how we handled sustainability in that year and which results were achieved with respect to sustainability. In the interests of transparency, on our website we also publish an annual overview of our total investment portfolio, to provide the vote summary report of shareholders’ meetings, and report on the progress we have made through engagement.
We also ensure that we comply with transparency requirements laid down in regulations and guidelines, such as the IMVB Covenant, the EU Sustainability Finance Disclosure Regulation (SFDR), and the Principles of Responsible Investment (PRI). The PDN Magazine and the website also regularly feature items on PDN’s sustainability policy.
Outcome of the objectives for Transparency
In the area of transparency, we have formulated a number of KPIs with accompanying targets. These indicators relate to the publication of the Sustainability Report and the sustainability policy on PDN’s website, participation in the VBDO Benchmark on Responsible Investment and, lastly, the publication – by March 31 of the following year – of a list of holdings within the listed share portfolio, credit portfolio, and nominal state portfolio in which PDN has invested as of the end of the year. In 2021, PDN met all the transparency KPIs.
Mandatory legislation and regulations with respect to sustainability have increased in recent years as a consequence of the European Action Plan “Financing Sustainable Growth.” The purpose of this Action Plan is to encourage the financial sector to contribute to the Paris Climate Agreement objectives.
In 2021, a great deal of effort went into implementing new European sustainability legislation and the IMVB covenant. IMVB stands for International Socially Responsible Investing and includes standards on how to handle issues such as supply chain responsibility, human rights, child labor, the environment, and corruption.
EU Sustainability Finance Disclosure Regulation
In 2021, we implemented the obligations set out in the EU Sustainability Finance Disclosure Regulation (SFDR), level 1. Under this legislation, an “Article 8 classification” has been chosen. This means that PDN realizes sustainability characteristics within its investment portfolio and also reports on them transparently.
PDN believes it is important to also invest in economic activities that contribute to these ecological objectives. Through the Taxonomy Regulation, the European Union has established criteria for determining whether each economic activity is carried out in a sustainable manner. In the fourth quarter of each year, PDN will review the data of companies in the portfolio and assess the target percentage of Taxonomy-classified investments that PDN can set for the following year.
We will implement the tightened sustainability policy further in the coming period. In 2022, we will start measuring various sustainability scores and Sustainable Development Goals in the investment portfolio. This will give us a better understanding of how our portfolio is performing and how it contributes to sustainability. This year, we will also investigate possible new impact investments. Implementing our tightened ambition and our sustainability policy is an ongoing process.
Looking ahead, here are a few examples of actions we have already identified for ourselves in 2022 in the area of sustainability. You can find more information on our approach and actions in the complete 2021 Sustainability Report on the Downloads on our website under the heading Sustainability.