The move from Fossil fuel investments ‘en masse’. 

As the great, good, wicked and corrupt gather in Glasgow to sip soft water and get covered in damp greyness a hot topic will be a pension funds vow to disinvest from fossil fuel related investments. 

Who is this pension fund? 

None other than Stichting Pensioenfonds ABP (the National Civil Pension Fund). 

It has over 3 million ‘members’ and is the largest pension fund in the Netherlands and in the top 5 globally. 

Corien Wortmann-Kool has been running the show since 2015 and has been the driving force behind this enormous shift of funds away from fossil fuels. 

It’s notable that the Cayman Island based Carlyle Group now own AlpInvest Partners who are responsible for investment management of ABP.  

ABP is dumping £15Billion of fossil fuel related investments with many of these disposed of via their NY based investment arm APG. 

This will increase funds available to the New Holland Investment company who manage ABP’s $20 Billion or so Hedge fund investments out of NY. 

Whether this will help with hedge fund activity and returns is another question. 

Is this disivestment from Fossil Fuel related investments dramatic? 

No, it’s a predicable move by ABP. The only dramatic part is that ABP is one of the 5 largest pension funds in the world. Others will follow suit, or are already in the process of dumping fossil fuels. 

What is ABP in Netherlands? 

To reiterate – Stichting Pensioenfonds ABP (“National Civil Pension Fund“), frequently referred to as ABP, is the pension fund for government and education employees in the Netherlands. Originally, the pension fund was a government controlled entity that fell under the authority of the minister of home affairs in The Hague. 

Who is Corien M. Wortmann-Kool? 

Corien M. Wortmann-Kool is Chairman of the Board of Stichting Pensioenfonds ABP.

Ms. Wortmann-Kool is a former Member of the European Parliament and Vice President on Financial, Economic and Environmental affairs for the EPP Group (European People’s Party). 

Are fossil fuels are a bad bet financially? 

It’s proabably safe to say that because their by products (emissions) are killing the planet and choking people.

Who else has disinvested from fossil fuels? 

Notable disinvestments from other large entities include the Ford foundation (largest family foundation in the world) and Harvard University to name two. 

Canada’s second largest pension managers, Caisse De Depot et Pacement du Quebec has also turned its back on fossil fuels. 

Many others are following.

As part of this ABP Stichting Pensioenfonds Review 2021 the PTHub evaluate certain motives.

What is ABPs stance on sustainable and responsible investment? 

In 2020 ABPs policy was focusing on 3 transitions: 

  • Becoming limate neutral by 2050. 
  • The conservation of natural raw materials and new approach to natural resources.
  • Digitization of society (umm).

How many employers are under ABP? 

3,557.

What is ABPs funding ratio? 

As of 2019 it was 93.5%. 

What are ABPs pension contributions? 

2020 – €11,741,000. 

What overall returns were achieved in 2020? 

6.6% (vs 16.8% in 2019) 

What were returns from fixed income? 

3.7% 

What were ABP returns from Equities? 

8.7% 

What were ABP returns from Alternatives? 

-1.5% (poor punting) 

What were ABP returns from Real Estate? 

-10.2% 

What were ABP returns from currency and interest rate hedging? 

1.7% from currency hedging and 1.1% from interest rate hedging? 

ABP Stichting Pensioenfonds Review 2021

PTHub Opinion on portfolio returns: Due to the diabolical returns from  commodities (with in the alternative portfolios) and dire returns from real estate it was fortunate timing and trading within currency and interest rate hedging that made all the difference. Without this overal returns would have been around 3.5%. 

How does the Mercer’s Global Pension Index rate ABP? 

In 2020: 

The Netherlands came top with 82.6 points, followed by Denmark with 81.4 and Israel with 74.7 points. 

For comparison, the UK lags at 64% or so. 

What was the average net pension benefit in 2020? 

€10,006  

What was value of pension contributions in 2020? 

€11.7 Billion 

Who are ABPs most important stakeholders? 

The particpants that contribute to the pension and the employers under the umbrella of ABP 

Who are ABP’s regulators? 

De Nederlandsche Bank (DNB) and AFM (Dutch Authority for the Financial Markets) 

EIOPA (European Insurance and Occupational Pensions Authority) 

What were the most important topic from ABPs survey for sustainable and responsible investment 2020? 

  • Sustainable Energy (that explains the fossil fuel exit then!) 
  • More efficient use of raw materials and more reuse of waste 
  • Fight against climate change 
  • Good healthcare 
  • Protections of forests and threatened species 
  • Sustainable use of the seas and oceans 
  • Education
  • Eradication of poverty  
  • Safety, justice and economic growth 

ABP Stichting Pensioenfonds Review 2021

We can see the noble causes of ABP and clearly sustainable energy and the fight against climate change are at the forefront of their future investment strategy. In comparison safety and justice are areas ABP are least concerned with.

What is putting financial pressure on ABP in 2021? 

The two main sources of pressure are the Covid – 19 story and and low interest rates. 

How volatile has ABPs funding ration been? 

Whilst it’s around 93/5% now it tanked ot 82% at the beginning of 2020 (down from 97.8%). Thus, it’s imperative that interest rates rise and Covid is closed off. 

Why is 104.2% an important number? 

Under the current Financial Assessment Framework the policy funding ratio or current funding ratio neesds to be above 104.2% otherwise a reduction in pension payments will be activated.  

PTHub and ABP 

The Pension Transfer hub and its committee members continue with their interest and observations of ABP. The move from fossil fuels is welcome but long overdue. Thankfully, good decision making via the currency and interest rate hedging teams ‘bagged’ a good return for the year. Without these, returns would have been dismal.  

The headwinds of the Covid – 19 crisis will not subside and interest rate rises will be small.  

The PT Hub does not consider either the policy funding ratio or current funding ratio will reach the required level to prevent reduced pension payments. 

This is bad for recipients of ABP pension money.

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