San Lie: The most important climate action comes from outside the A12 highway

San Lie: The most important climate action comes from outside the A12 highway

Climate Change Energy Transition
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By San Lie, Director of ASN Impact Investors

Blocking the A12 highway as a protest against fossil subsidies. It seems a bit far removed from the world of big money and the world of pension funds. But is that true? Pension funds also want to move towards a more sustainable world, but still struggle too much with the question of how. Who will help them get started faster?

It is well known that pension funds also want 'more' with sustainability. Last summer I came across an encouraging study in that regard in the economists' journal ESB. Researchers from Maastricht University have analyzed almost 1,000 annual reports of the 160 largest pension funds over the five years up to and including 2021 to determine what funds report about sustainability. The good news: attention to sustainability is growing year after year.

The annual reports increasingly devote more text to sustainability and are also more specific about this. A phenomenon such as green bonds only appeared four times in 2016, but in 2021 forty funds were already talking about this more sustainable debt paper. The funds also share their views on the exclusion of investments and other sustainable investment strategies more often and in more detail.

But here's the thing: the researchers also filtered from the texts what pension funds actually do in terms of sustainable investing. To what extent have they implemented sustainable strategies, and for what proportion of the total portfolio?

Implementation lags behind intention

The implementation of the green plans lagged far behind the attention to sustainability, the study concluded. 'This may be because it takes some time to develop a policy and then implement it. It may also be because pension funds want to improve their sustainability policy and therefore write about it, but they are still looking for how they want to implement it.'

Economists have no doubts about the sincerity of pension investors to become more sustainable - and neither do I. Because whether it concerns limiting ESG risks, the increasing pressure from supporters and society to invest responsibly, or sustainable regulations and covenants: sustainable strategies are a no-brainer, or at least well-understood self-interest.

Actions speak louder than words

I only partially understand the implementation that lags behind the intentions.

As a financial professional, I understand that fund managers are searching, that they first formulate policy and explore how they can shape an effective strategy before they start 'polishing'. But as a concerned citizen and concerned parent, I worry about the future of our children. And as a Rotterdammer, I am used to sleeves being rolled up and hands on (together).

Cooperation is key

I therefore regard this research indirectly as an outstretched hand to cooperate. The road to a sustainable economy is and remains a quest, without signposts to a predetermined final destination. But parties that have been on the road for some time can help other pension funds accelerate with their experience and insights. That is our outstretched hand to the sector.

And then back to the A12 protests: it seems a bit radical, sitting on a public road to draw attention to the climate. But isn't it just as radical as an investor to stay where you are and not move? If we move faster towards a world in which the economy is in balance with nature, we can reassure future generations. Then the A12 flows smoothly again.

San Lie is Director of ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.