Green steps
Last year, we asked you what you consider important with respect to sustainability at the Pension Fund. We analysed the results of that survey.
Recent results that have been achieved
‘A result that TNO Pension Fund recently achieved is that there is a major focus on investment in bonds that aim to resolve social issues, including climate issues. In late December, for instance, we instructed our European corporate bond managers to start investing structurally in impact bonds. Impact bonds is a collective term for Green bonds, Social bonds, and Sustainable (linked) bonds; also known as GSS bonds. As a next step, we also want to add GSS bonds to the investment portfolio that invests in long-term state bonds. These bonds are enabling us to take major steps in making our investment portfolio more sustainable. This is also a perfect match for the wishes expressed in the survey.’
Activities we’re working on
‘We’re currently in the process of selecting a developed-market equity fund that invests in line with the European Paris-Aligned Benchmark (PAB for short). Climate and energy, two points from the survey, also feature strongly in this. This benchmark was introduced as a tool for the transition to a low-carbon economy, as set out in the Paris Climate Agreement. Specifically, that means the 1.5°C scenario in 2050, a reduction in carbon emissions of at least 50%, and a reduction of at least 7% year-on-year in the following years. I expect us to meet that around the summer.’
‘We are also seeking an advisor to support the Administrative office with respect to ESG policy. This will enable us to place even more focus on sustainability in our policy.’
‘But perhaps most attention will be on the SFDR legislation. The SFDR, Sustainable Finance Disclosure Regulation, is a European regulation that came into force in 2021. It requires financial institutions, including us as a pension fund, to provide information on sustainability policies and their implementation. The aim is that we become transparent about how sustainable we are. It also stimulates us to take additional steps in Socially Responsible Investing. Of course, that’s a good thing, but it’s also quite a challenge because the legislation is new for all pension funds, especially the mandatory reporting involved. A lot of work and coordination with other pension funds is going into that.’
‘The aim is that we become transparent about how sustainable we are.’
How is the Pension Fund handling the exclusion of weapons? Is that not a dilemma now TNO has realized that defence is more important than ever?
‘The situation in Ukraine and the war with Russia has made defence more important than ever. TNO has also noticed that with respect to defence research. Defence research is indeed an important task for the sponsor, TNO. Military personnel need modern protective equipment, ammunition, and weapons to carry out their missions effectively. TNO has been a leader in innovative Research and Development activities in this field for over 75 years. As a pension fund, we have a clear and transparent weapons policy. We exclude controversial weapons in all those investment mandates in which the holdings are in our name. We don’t want to invest in that at all, not even just a little bit.’
‘There’s more too. The war has also influenced our investment portfolio. And rightly so, of course. The pension fund applies sanctions legislation regarding the exclusion of countries, and more specifically, government bonds issued by countries on which the EU and the United Nations have imposed sanctions. This means that we no longer invest in state bonds from Russia and Belarus. We also divested investments in Russian and Belarusian companies due to human rights violations.’
Why does the website now have sustainability pages and information on remuneration policy?
‘The dedicated sustainability pages we’ve added to our website are part of European SFDR legislation.’ It is a compilation of all legal information from the SFDR. If you look at ‘The scheme’, you’ll always see a link to those pages in the right margin. One of the aspects concerns the remuneration policy. You can read there what the remuneration policy is and how it is consistent with integrating sustainability risks. What we mean by this is that the remuneration of Administrative office employees should be independent of the steps we’re taking to reduce sustainability risks. The Pension Fund Board believes that giving reward incentives to make the investment portfolio more sustainable is wrong and is not in line with the Pension Fund’s or the sponsor TNO’s ambition to become gradually sustainable.’
Would you like to know more?
We have a lot more to do on sustainability. That’s why we’re seeking an advisor to support the Administrative office with respect to ESG policy. If you want to stay informed, keep an eye on the news on the website or read the TNO Pension Fund news mailings, which also tell you about the green steps we’re taking.
For example, we’re working on a strategic policy plan for the Administrative office that looks further ahead than the annual operational ESG plan. You’ll soon be able to read more about this there.