The Netherlands is a nation where most pension funds have some focus on responsible investing. And yet a recent decision by the largest Dutch pension administrator, APG, demonstrates the complexities of investing responsibly while also meeting fiduciary and efficiency requirements as well as how slowly concerns about climate change are influencing the energy industry.
APG manages the investments of five Dutch pension funds, including ABP. APG manages €359 billion and is one of the largest pension administrators in the world. In a recently released responsible investing report, APG stated that it will not be investing further in sustainable energy, such as the offshore wind farms currently being promoted by the Dutch government, and will instead focus on fossil fuels in the energy space. The fund explained that this was because offshore wind fund technology is not sufficiently developed and that subsidizes provided by various governments related to sustainable energy are too fickle to satisfy the fund’s efficiency requirement.
APG argued in its report that investing in alternative energy sources such as wind and solar power “are largely dependent on subsidies and tax advantages,” which are regularly shifting and are thus not secure. APG described this uncertainty as “not a solid basis for long-term investments.” APG has nonetheless invested €1 billion in renewable energy, representing 0.3 percent of its invested capital, including in wind turbines on land. This pales in comparison with the approximately €10.2 billion, or three percent of managed assets, it has invested in oil and gas companies.
Not all European funds, however, are reticent to invest in renewable energy or move away from fossil fuels. Danish pension fund PKA recently invested in the construction of the Dutch offshore wind farm Gemini. And the Swedish pension fund AP4 recently scraped a number of its fossil fuel investments.
Unfortunately, APG’s decision reflects its conclusion that energy companies are not yet seriously taking into account governmental action on limiting the impact of climate change and global warming.
Mattie Bekink leads the Center's work on ethical investing.