Only five Dutch pension funds have met a 2018 commitment to implement the OECD guidelines for responsible investment and the UN Guiding Principles for human rights. Especially smaller funds allocated insufficient resources to implementing the so-called IMVB covenant for responsible investing.
The IMVB pact originally had 78 pension fund signatories accounting for more than 90% of Dutch pension assets, which had come down to 75 by 2022 following several fund mergers.
Only five pension funds have implemented all the covenant’s commitments, a monitoring commission has concluded. Moreover, in the final year of the covenant, the funds involved hardly made any progress, despite a call from the Pension Federation.
For each of the key indicators from the evaluation (policy, outsourcing, monitoring of outsourcing and reporting), between 15% and 30% of pension funds achieved all sub-objectives. Only five funds fully met all the main indicators.
A “sector-wide implementation” of the guidelines, the main objective of the covenant, has therefore not been achieved, according to the monitoring committee.
While many pension funds made some changes to their due diligence processes, only a few have done so in a comprehensive way. For example, a majority (52) of the pension funds have amended contracts with external asset managers to incorporate elements of the OECD guidelines, but only 15% have done so for all contracts.
Pension funds also score low (20%) on ‘transparency and reporting’. According to the monitoring committee, this is mainly due to “the lack of transparency about the results of engagement and decisions taken by large pension funds if engagement proves to be unsuccessful”.
Despite the fact that implementation of the covenant’s agreements “proved more difficult than expected in certain areas”, independent chair of the IMVB covenant Pieter van der Gaag looks back “with satisfaction”.
He said: “Although the full objectives of the covenant were not achieved, the results fortunately show that a large proportion of the pension funds are well on their way to do so.”
Unsuccessful engagement
As part of the pact, 12 participating pension funds also worked with NGOs, trade unions and the government to identify, prevent or address negative impacts of investments through engagement with companies.
However, the pension funds’ engagement processes with a car manufacturer and a miner, among others, have “[still] not had any impact on the ground”, the monitoring committee concluded.
Moreover, the committee saw “few lessons learned at the policy level” as it might have been more effective to focus on cases closer to home, rather than on issues such as labour rights for miners in Peru.
“Examples could be the use of migrant labour in agriculture and transportation, or the impact of large-scale industry on local residents. By also identifying issues closer to home and engaging with local companies, the effectiveness of the cooperation as well as the recognition by pension fund participants could potentially be increased,” according to the monitoring committee.
Board attention
The monitoring committee also identified several reasons why the implementation of the covenant largely failed. In this regard, it noted that many boards of participating pension funds, particularly the smaller ones, “failed to sufficiently provide the attention” needed to implement the covenant.
Many pension funds appear to have had “insufficient awareness of what they were committing to” when they signed the agreement, it concluded.
A factor here is that the IMVB covenant had to compete for attention with other administrative priorities, such as implementing the Sustainable Finance Disclosure Regulation and preparing for the transition to a defined contribution system.
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