Survey: Many Dutch schemes lack ESG policy for mining investments

Only approximately 20% of Dutch pension funds have a specific policy in place aimed at ESG risks on their investments in mining companies, a survey by the Dutch Association of Investors for Sustainable Development (VBDO) has suggested.

The survey, conducted among the 50 largest Dutch schemes, showed that pension funds were aware of the large risks posed by emissions, water pollution, dealing with neighbours as well as safety, health and reputational aspects, but only a minority had mapped out these hazards.

According to Mart van Kuijk, researcher at VBDO, the lack of a policy meant that pension funds would likely only take action after well-publicised incidents.

He said he was under the impression that only larger schemes in particular had formulated a policy. “This would be quite an effort for smaller pension funds, because of lack of expertise and generally accepted standards.”

Dutch schemes invest no more than 3% of their equity portfolio in mining firms, but they also invest in companies using large amounts of commodities, such as computer manufacturers. But because of the absence of a unilateral definition of commodity-intensive companies, these firms are not included in the mining sector, VBDO found.

The survey indicated that, although pension funds consider engagement as the most effective way to achieve behavioural change in companies, no more than half of the schemes and their asset managers had started dialogue.

Van Kuijk believes the lack of a generally accepted standard for mining firms was the main barrier to an active approach by pension funds. He explained that the existing standard Initiative for Responsible Mining Assurance (IRMA), which took a company’s mining locations and commodities into account, hadn’t been completed nor had it been embraced by all investors and companies.

Mining is a key element in the international covenant for responsible investment (IMVB), which has been signed by almost 80 Dutch pension funds last year.

VBDO revealed that 10 Dutch schemes would exchange their experiences on engagement with an anonymus mining firm, in order to provide other schemes with ideas for encouraging sustainability in the mining sector.