Pensioenfonds Detailhandel will collaborate with other pension funds on labour rights and tighten its escalation process for climate engagement, after requests from its members.
The €30bn scheme for the Dutch retail sector, made waves earlier this year when it spent three days working with 50 of its members to find out how they wanted the fund to integrate their values into its investment policies.
The board has now published its response to 49 recommendations made by the group after the workshops.
In the document, the scheme commits to take up many of the requests, including putting more emphasis on social issues and establishing stricter timelines for engaging with companies on the climate transition.
The board noted that human and labour rights are mentioned multiple times in the feedback from members. As a result, it has decided to remove the most serious violators of human and labour rights from Pensioenfonds Detailhandel’s portfolio.
“In addition to the investment choices we make and the dialogue we already enter into with companies, we [now] intend to remove companies that seriously violate labour rights from our portfolio,” said the board.
“This is a direct result of the importance that participants give to labour rights and working conditions in their recommendations,” it continued, adding that the fund is also exploring how to give “concrete expression to this” in its investment portfolios and benchmarks.
Speaking to IPE, Louise Kranenburg, head of responsible investment at Pensioenfonds Detailhandel, said it was important to understand how much certain social issues matter to participants because they are norms-based, rather than risk-based.
“Those things don’t always materialise as direct financial risks, so if you look at it just from an ESG-risk perspective you won’t be able to address them,” she explained.
But, she added: “If you ask most normal people if they like forced labour, they’re going to say ‘no’, so it’s also about understanding how much of a trade-off members are willing to make”.
Excluding lots of firms from the investment universe has financial implications, so Pensioenfonds Detailhandel spent time explaining those issues to participants before asking them to make recommendations. It is still working out how the additional exclusions will look.
As well as screening out some companies, the board wants to set up a collaborative project with other Dutch pension funds, and possibly trade unions, to work specifically on labour rights.
“In addition, the board members of Pensioenfonds Detailhandel will attend a training course on human rights in 2025 to increase their knowledge on this subject,” it said.
Among other recommendations the fund will take forward is a request to tighten its exclusion policy when engagement with a company is unsuccessful.
“The board has been grappling with it for a long time, but it is clear from the recommendations that participants aren’t happy with the idea that we will keep talking and talking with companies that aren’t changing,” observed Kranenburg.
“Our current responsible investment policy requires escalation for non-responsive or under-ambitious companies, but we’ve always struggled to make that work in practice. These recommendations give us a clearer mandate to define our timelines and the point at which we divest,” she said.
The details are still under development, but Kranenburg said they are likely to mirror some of the fund’s peers who give engagement efforts two or three years to demonstrate their effectiveness before exiting.
Pensioenfonds Detailhandel is also working out how to “deal with investments in the coal sector”, the board said.
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