The Pension Fund promotes environmental or social characteristics and invests only in companies that meet good governance requirements. Although the Pension Fund does not have sustainable investments as an objective, we do pursue a minimum share of sustainable investments of 3%. These sustainable investments have an environmental objective, but do not always qualify as environmentally stable under the EU Taxonomy legislation.

We promote environmental and social characteristics through our socially responsible investment policy, (SRI policy, pdf in Dutch), which focuses on the following themes:
• Climate change
• Human and labor rights
• Corporate behavior and governance

To implement the SRI policy, the Pension Fund uses the following tools:

1. Exclusion policy

2. Engagement policy by selecting asset managers that implement an active shareholder policy, through voting and engagement, focused on ‘good governance’.

3. ESG integration by preferably selecting SFDR 8 and 9 investment funds. An Article 8 fund is a fund whose investments promote environmental and/or social characteristics. An Article 9 fund is a fund whose objective is sustainable investments.

4. ESG integration by focusing on CO2 reduction targets.

5. Impact investing. The Pension Fund may select investment solutions that contribute positively to environmental or social themes in addition to financial returns.

The Pension Fund invests exclusively via investment funds and thus, can only implement the SRI policy and the environmental or social characteristics it promotes based on the selection and monitoring policy. A detailed description of our socially responsible investments can be found in the SRI policy (pdf, in Dutch).

The Pension Fund does not have a sustainable investment objective as defined in Article 2 (17) of the SFDR. Further, the Pension plan does not have a reference benchmark as referred to in the SFDR. Environmental and social characteristics (ESG) are promoted in 97.5% of the investments. The remaining investments (2.5%) consist of (government) bonds from emerging markets.

We monitor the following portfolio characteristics:
1.Violations of the principles of the UN Global Compact or the Organization for Economic Cooperation and Development (OECD) guidelines for multinational enterprises (PAI 10).
2. Exposures to controversial weapons (anti personnel mines, cluster munitions, chemical weapons and biological weapons) (PAI 10).
3. Countries with investments that violate social rights (PAI 16).
4.Greenhouse gas intensity of companies in which investments are made (PAI 3).
Monitoring is conducted by the fiduciary manager. Each year, a list of excluded companies and countries is made based on our exclusion policy. Based on this list, the (indirect) investments of the Pension Fund are reviewed.

In addition, our fiduciary manager provides an annual report on the average greenhouse gas intensity of the companies in which we invest. For the allocation of developed market equities, we aim to reduce greenhouse gas intensity in alignment with the agreements of the Paris Climate Agreement.

The fiduciary manger uses MSCI in order to compile the exclusion lists. Since we invest exclusively through funds, there may still be underlying investments in countries or companies on our exclusions list. However, this is expected to result in limited exposure at a total portfolio level. Greenhouse gas intensity information is not available for all companies in the portfolio. We expect the availability of data to improve over time, driven by developments in legislation.

These data restrictions are not expected to affect the achievement of the environmental and social characteristics promoted by the Pension Fund.

We conduct an annual due diligence review, which assesses the companies in the investment portfolio in accordance with the OECD guidelines for multinational enterprises and the UN Guiding Principles on Business and Human Rights. The results of the due diligence investigation are discussed and reviewed by the Board.

The Pension Fund does not have its own engagement policy as it invests exclusively through investment funds and the managers of these funds implement their own engagement policies.

The Pension Fund promotes environmental or social characteristics, and although we do not have a sustainable investment objective, we do pursue a minimum share of sustainable investments of 3%. These sustainable investments have an environmental objective, but do not always qualify as environmentally sustainable under the EU Taxonomy legislation.

The Pension Fund promotes environmental or social characteristics, as described in Article 8 of the SFDR. We do this through our socially responsible investment policy (SRI policy), which focuses on the following themes:
• Climate change
• Human and labor rights
• Corporate behavior and governance

For the implementation of the SRI policy, the Pension Fund uses the following tools:
1. Exclusion policy, which specifies that we want to exclude the following:
• Companies that structurally and grossly violate themes of the Global impact, OESO guidelines for multinational enterprises and UNGPs.
• Companies that are involved in the production of controversial weapons, including cluster munitions, anti personnel mines, and chemical, biological and nuclear weapons.
• Countries and companies that are subject to arms embargoes and/or sanctions.

The Pension Fund invests exclusively via investment funds and thus, can only implement the exclusion policy through a selection and monitoring policy and may still have underlying investments in countries and companies on our exclusions list.
2. Engagement policy by selecting investment managers that implement an active shareholder policy, through voting and engagement.
3. ESG integration by investing a minimum of 75% of investments in SFDR 8 and 9 investment funds. This ensures that (almost) all of the Pension Fund’s investments aim for as many environmental and/or social characteristics as possible and that ‘good governance’ is guaranteed for the companies invested in.
4. ESG integration by focusing on CO2 reduction targets. With its investments, the Pension Fund wants to contribute to combating climate change. For the equity portfolio (developed markets), the Pension Fund has defined a strategy that follows the de carbonization path in alignment with the objectives of the Paris Climate Agreement. The Pension Fund achieves this by selecting an EU Paris Aligned Benchmark for equity allocations in which these characteristics are enforced. For listed real estate investments, a strategy has been chosen which aims to reduce greenhouse gas emissions by 30% compared to the broad benchmark.
5. Impact investing. Through investments in Green Bonds, we contribute to the financing of the energy transition.
The Pension plan does not have a benchmark as referred to in the SFDR.

The Pension Fund implements an investment strategy in which the investment risk of the liabilities is managed via investments in fixed income securities (European government bonds, liquid assets, corporate bonds and residential mortgages). In addition, the Pension Fund invests through the return portfolio in equities, listed real estate and government bonds of emerging markets. The allocations adhere to the Asset Liability Management calculations and are used as input for the Strategic Asset Allocation. The Pension Fund invests exclusively via investment funds and thus, can only implement the SRI policy, the environmental or social characteristics it promotes and good governance requirements based on the selection and monitoring policy. The selected investment funds that invest in companies have their own policies regarding good governance, which is reflected in the SFDR 8 and 9 classifications that these funds maintain. A detail description of our socially responsible investments can be found in the SRI policy (pdf, in Dutch).

The Pension Fund does not have a sustainable investment objective as defined in Article 2 (17) of the SFDR. The planned asset allocation in relation to SFDR is as follows:

‘Other’ investments refer to the Pension Fund’s investments in emerging market local bonds denominated in local currency. This category is included with the aim of improving the risk/return profile of the investment portfolio. The Pension Fund invests primarily in government bonds, but it is possible that the investment manager also invests in state related companies. No minimum environmental or social guarantees are defined for this.

We monitor the following portfolio characteristics:
1. Violations of the principles of the UN Global Compact or the Organization for Economic Cooperation and Development (OECD) guidelines for multinational enterprises (PAI 10).
2. Exposures to controversial weapons (anti personnel mines, cluster munitions, chemical weapons and biological weapons) (PAI 14).
3. Countries with investments that violate social rights (PAI 16).
4. Greenhouse gas intensity of companies in which investments are made (PAI 3).
Monitoring is conducted by the fiduciary manager.

Each year, our fiduciary manager compiles a list of excluded companies and companies based on our exclusion policy. Based on this list, the (indirect) investments of the Pension Fund are reviewed. As the Pension Fund invests exclusively via investment funds, its exclusion policy can only be implemented through a selection and monitoring policy and there may still be underlying investments in countries and companies on our exclusions list. In addition, our fiduciary manager provides an annual report on the average greenhouse gas intensity of the companies in which we invest in. These figures are based on the calculation methodology of the Partnership for Carbon Accounting Financials (PCAF) and include scope 1, 2 and 3 data in which emissions are expressed relative to company sales. Where relevant, we compare our emissions with the greenhouse gas intensity of market value weighted benchmarks. For the allocation to developed market equities, we aim to reduce greenhouse gas intensity in alignment with the agreements of the Paris Climate Agreement.

The fiduciary manager uses data from MSCI in order to compile the exclusions lists and to calculate greenhouse gas intensity.
The fiduciary manager adheres to a process to assess the quality of the data, such as checks for consistency, amendments and supplementation from other sources. For the calculation of greenhouse gas intensity, this data is not available from all companies in the portfolio. Scope 1 and 2 concerns direct and indirect greenhouse gas emissions and is generally well available for companies included in the market value weighted index. Missing data are estimated based on sector averages.

The fiduciary manager uses data from MSCI in order to compile the exclusions list. The analyses are mostly retrospective, which may not incorporate all current information. As we invest exclusively via investment funds, there may still be underlying investments in countries and companies on our exclusions list. This may be due to the exclusion criteria of the investment fund manager or because the investment fund manager uses different data sources or revenue thresholds than our fiduciary manager for determining, for example, involvement in controversial weapons or violations of international standards. However, this is expected to result in limited exposure at a total portfolio level. We apply a trigger limit of 1%. Deviations from this limit results in discussions with the respective asset manager, but does not necessarily lead to changes in the portfolio. The portfolio is screened annually.

Greenhouse gas intensity information is not available for all companies in the portfolio. Missing data are estimated based on sector averages. This is only possible for companies with activities that have sufficient overlap with the sector. We expect the availability of data to improve over time, driven by developments in legislation. For the current universe, we have established de carbonization targets (developed market equities), and there is a data availability of scope 1, scope 2 and scope 3 of approximately 95%. Of this, up to 70% may be from the result of model estimates.

These data limitations are not expected to affect the achievement of environmental and social characteristics promoted by the Pension Fund. 

We conduct an annual due diligence review, which assesses the companies in the investment portfolio in accordance with the OESO guidelines for multinational enterprises and the UN Guiding Principles on Business and Human Rights. With this screening of the investment portfolio, we identify (potential) negative impacts on society and the environment. We prioritize the most serious negative impacts at least on the basis of: severity, scale and irreversibility. For this purpose, we use a classification system for the negative impact generated (0 to 5), in which we include the most negative impact (categories 4 and 5) further in our screening. The results of the due diligence review are discussed and reviewed by the Board. The Pension Fund assesses whether the existing policy principles, standards and mitigation measures in relation to the violations in the portfolio are still adequate. The due diligence review is carried out for us by our fiduciary manager, using analyses from MSCI.

The Pension Fund does not apply its own engagement policy as it invests exclusively through investment funds. The investment managers of these investment funds apply their own engagement policies. When selecting (new) asset managers, we take into account how the investment manager implements their engagement policy, evaluating the implementation of the engagement policy on an annual basis. In this assessment we include: the number of companies with which a dialogue has been conducted, the progress and results of these dialogues, the follow up decisions and the extent to which these dialogues have contributed to recovery and remediation in the event of negative impacts on society. 

The Pension plan as a whole does not have a reference benchmark as referred to in SFDR. As such, this section is not applicable.