Stichting Pensioenfonds ABP

Stichting Pensioenfonds ABP
Quick Facts
Type	Public sector pension fund
sector	Financial Services
Headquarters (Benelux Organization)	Heerlen, The Netherlands
Year of Origin	1922
Reported emissions	21.35 million tonnes of CO2 (2020)
NCI assessment	Low
Available assets	EUR€ 528 billion (2020)
Stock Exchange	None
Key People	Harmen van Wijnen (Chairman Executive Board), Yolanda Verdonk-van Lokven (Executive Board Member); Dominique Dijkhuis (Executive Board Member)
Number of Employees	41 (in 2020)
Subsidiaries	Algemene Pensioen Groep (APG)

Stichting Algemeen Burgerlijk Pensioen, stylized as Pensioenfonds ABP, is the biggest pension fund in the Netherlands, and among the largest worldwide. Its headquarters are situated in Heerlen, a city in the Dutch province of Limburg. ABP offers all types of pensions, such as a Disability Pension, a Partner's Pension, and a Retirement Pension. The pension fund was established in 1922, primarily to regulate the pensions of Dutch civil servants and teachers. At the time it was government controlled, but in 1996, ABP was privatized. In 2020, the fund served over 3.1 million employees, and an additional 3,557 employers. The pension fund itself only had 41 employers as of 2020, but its executive subsidiary Algemeen Pensioen Groep NV (APG) has over 3,124 employers in the Netherlands and another 246 abroad. Although ABP predominantly provides pensions to Dutch citizens, the company invests worldwide. At February 28th, 2022, ABP's current assets were worth €528 billion. Their liabilities accounted for €475 billion.

Company Structure

ABP's management model consists of three executive members, twelve non-executive members, and one independent chairperson. The executive members are responsible for the daily management, such as decision making and implementation. The non-executive members have a supervisory role. They are appointed by employees, employer-organizations or retirees. The board is led by an independent chairman.

ABP's headquarter are in Heerlen, the Netherlands.

Furthermore, ABP has outsourced the pension administration and management of invested capital to de Algemene Pensioen Groep (APG). In collaboration with Cordares, APG is responsible for for providing pension funds to individuals employed in the sectors education, government, construction, social work, medical specialists, architectural bureaus and social housing. In 2020, APG managed a total of €573 billion worth of assets.

Executive Board

Executive Board

Name	Function	Remuneration x1000 EUR
Harmen van Wijnen	Chairman Executive Board	130,637 (2020)
Yolanda Verdonk	Executive Board member	Unknown
Dominique Dijkhuis	Executive Board member	Unknown

According to the 2020 annual report, this is what chairman H. Wijnen would make from May first, 2020 onwards. However, there is no telling what the remunerations are for the other board members, as they have only recently been appointed (Y. Verdonk in 02/2022 and D. Dijkhuis in 01/2022). Most likely, the salaries will not be able to be higher than €200,000 due to the Wet Normering Topinkomens (The Top Income Standard Law).

ABP does state in a 2019 position paper that they strive to keep the managament wages in line with the wages received by their clients. This means that the salaries will grow at the same rate as those of teachers and civil servants. However, ABP does grant performance bonuses to its directors. In addition to that, it allows its subsidiary APG to pay out high bonuses to those employed in the asset management department, spending more than 31.5 million EUR on bonuses alone. On top of that, wages amongst those working at APG are significantly higher. In 2020 Annette Mosman (CEO) made €520,070, and Ronald Wuijster (head of the APG Asset Management) made €748,865.

Supervisory Board

Supervisory Board

Name	Function	Remuneration x1000 EUR (2020)
Corien M. Wortmann-Kool	Chair Supervisory board	130
Aldert Boonen	Member supervisory board	Unknown
Patrick Fey	Member supervisory board	90
Anne Gram	Member supervisory board	Unknown
André van Vliet	Member supervisory board	95,75
Krista Nauta	Member supervisory board	90
Paul Rosenmöller	Member supervisory board	Unknown
Loek Sibbing	Member supervisory board	90
Vandena van der Meer-Gangapersadsing	Member supervisory board	Unknown
Conchita Mulder-Volkers	Member supervisory board	90
Xander den Uyl	Member supervisory board	90

The reason the salaries and additional benefits of some of the supervisory board members are unknown, is because they did not begin working at ABP until or after 2021.

Accountant

The independent auditor of Pensioenfonds ABP is KPMG Advisory N.V. They have been ABP's accountant since January 1st, 2016. In ABP's 2021 annual report, KPMG makes no mention of the risks that global warming can and consequently will have on ABP's investment portfolio. Despite referring to the "potential effects of COVID-19 on the financial reports" they do not make a similar mention of the climate crisis.

Main Activities

As ABP is a pension fund, it functions on the basis of capital funding. This entails that an employee, alongside their employer, accrues pension entitlements. These are put into a pension fund (in this case ABP) who then invests these contributions into different establishments, companies, and stocks. Over time, the pension fund increases the amount of capital they initially started out with, so that by the time someone goes into retirement, the pension they receive is more than what they deposited as pension entitlements. In the Netherlands, the pension system features “collectivity, mandatory participation, efficient administration and [it] is not-for-profit". Because of this, it is beneficial for clients that ABP manages to expand their capital over the years and invests wisely. This especially since over 3.1 million Dutch citizens are affiliated to ABP.

At the start of 2022, their expected liabilities were €475 billion; this is the value of the pensions which ABP must pay out now and in the future. Meanwhile, their available assets (investment endeavors) were worth €528 billion. This means that, were every Dutch civil servant and teacher to suddenly retire, ABP would have the sufficient funds to cover all of the pensions, and then they would have an additional €53 billion left. At the time, their coverage ratio was 111.0%.

ABP has a diversified investment portfolio. At the end of 2021, they had invested a total of €551,614 million in thirteen types of categories. These range from basic materials, to energy, to financial institutions. ABP invests most in other financial institutions (€138,171 million - 25.04%), public authorities (€129,388 million - 23.46%), and information technology (€59,159 million - 10.72%). They invested slightly more than €16 billion in the energy sector. ABP invests worldwide, but predominantly seems to focus on North America (€207,445 million - 37.61%) and the European Monetary Union (€189,280 million - 34.31%).

According to their overview of the holdings of ABP as per December 31st 2021, ABP has invested in some 867 companies worldwide. 35 of these are amongst the top 100 most polluting companies worldwide. In total, they invested about €1,499 million in these 35 companies alone.

Government

ABP has been privatized since 1996, which means that the government is no longer in charge of how the pension fund invests its money. Prior to its privatization, ABP’s investment freedom was curtailed by the Dutch government. For instance, they were not allowed to engage in foreign investment. Nor could they own more than five percent of any one company. Additionally, they had to invest all government contributions in government debt.

These restrictions have since been lifted, and ABP is free to invest wherever they like. They do continue to invest a lot in government bonds.

ABP has not received any government-implemented COVID-19 support such as Temporary Emergency Bridging Measure for Sustained Employment (NOW) support. It has however invested a total of €927 million in governmental corona obligations. Nor has ABP attained a royal status. However, it is in the government’s interest that ABP acts in the common interest of the public. This because the accrual of ABP’s pension fund is tax-facilitated, which results in less tax money flowing into the governmental treasury. Thus, Pensioenfonds ABP has to act with integrity, efficiently, trustworthiness, and transparency.

Paris Agreement until Today

According to ABP, they strive to have their investment portfolio in line with the Paris Climate Agreement. Hence, they aim to contribute to a future where the world economy is climate neutral by 2050, and that global warming is limited to maximum 1.5⁰C.

In 2019 ABP signed the Climate Commitment of the financial sector. The 54 signatories committed to make a substantial contribution to the implementation of the Paris Agreement and the Dutch Climate Agreement. Concretely: they will measure the CO2 content of their relevant loans and investments and report on this from 2020 onwards and they will publish action plans by 2022 at the latest, including reduction targets for 2030 for all their relevant loans and investments.

Criticism on this commitment:

• This commitment is without obligation. There are no requirements set for the action plans to be published in 2022. Only 19% of signatories had an action plan in line with the Paris Climate Agreement by 2020. In addition, the commitment does not specify the relevant financing and/or investments on which the institutions must report. In 2020, only 9 out of 54 financial institutions report on all relevant asset classes.
• The pace of implementation of this commitment is too slow. Financial institutions such as ABN AMRO, Aegon, ING and Rabobank already committed themselves to the Spitsbergen ambition in 2018, in which they promised to combat climate change. In 2020, almost half of the institutions did not yet have a climate plan.

Financial Results since 2015

Financial situation

Year	Asset value
2015	€396,673 billion
2016	€422,310 billion
2017	€454,599 billion
2018	€451,691 billion
2019	€531,473 billion
2020	€574,050 billion
2021	€599,363 billion

Current Emissions

According to ABP itself, the CO2-emmissions from all of their investments account to 21,355,163 CO2e in total. When looking at their assets, state obligations and private equity, ABP exclusively takes scope 1 and scope 2 into consideration. The only sector for which they look into scope 3 is the real estate market.

The reason behind this informational gap is that according to them "data on scope 3 emissions are not trustworthy enough yet and it would lead to double counting". Because they retrieve their data from independent instances, such as GRESB for the real estate market, ABP is unable to provide specificities on the amount of scope 3 emissions in this sector. This does undermine ABP's targets, considering they do not provide sufficient data on their emissions. Although they argue to investigate the "possibility of reporting scope 3 in the future" they fail to provide a comprehensive agenda for this.

When looking at data provided by APG, ABP's subsidiary, the rate of CO2-emissions seems to be slightly higher. This is logical, given APG also manages assets for other pension funds such as BpfBouw. They reported a total of 24,852,626 tCO2e over 2020. This was reduced quite drastically to 19,000,598 tCO2e over 2021.

Total emissions (all scopes) as published by ABP and subsidiary APG

Year	ABP (scope 1, 2, and 3*)	APG (scope 1, 2, and 3*)
2020	21.36 Megaton CO2	24.85 Megaton CO2
2021		19.00 Megaton CO2

The only sector for which scope 3 is accounted is the real estate market. As a result, this leaves out a lot of data with regard to the total amount of emissions, especially considering ABP's investees' scope 3 emissions are particularly high. Additionally, ABP does not report on emissions from its own business operations, providing yet another gap.

Climate Policy and Plans

2015 to 2020

In response to the Paris Climate Agreement, ABP published a Sustainable and Responsible Investment 2015 report. Here they argued that they would strive to become a sustainable pension fund. Building onto the idea that “returns and sustainability go hand in hand,” ABP pledged to focus on responsible investments. In collaboration with their investment organization APG, they strived to solely invest in companies setting good examples, and exert their influence on incentivizing companies to improve.

Some of the clear goals they set themselves were to i) cut their CO2 footprint of their equities portfolio by 25% between 2016 and 2020; ii) increase their investment in renewable energy to €5 billion; iii) double their investment in solutions to social and environmental problems to €58 billion by 2020; and lastly iv) invest an additional €1 billion by 2020 in their participants’ areas of involvement: education and communications infrastructure. They gave themselves until 2020 to introduce these new policies.

By the end of 2020, ABP had reduced the CO2 footprint of its equity portfolio by 44 percent compared to 2014. However, important to take into consideration here is the effect that the COVID-19 pandemic had on polluting sectors such as energy and industry. As a response, ABP’s portfolio managers naturally invested less in these sectors, hence sharply reducing their CO2 footprint. It is unclear if the portfolio managers would have made the same choices if it had not been for the economic turmoil following the COVID-19 outbreak.

Image 1: How are ABP's energy investments distributed?

ABP did increase their investment in renewable energy with a total of €6.5 billion. Part of this money has gone to Merkur Offshore, a large wind farm situated in the German sector of the North Sea and the Dutch wind farm Goeree-Overflakkee. ABP does however continue to invest in energy company Engie whose subsidiary owns nuclear power plants. According to the opposition, nuclear energy is costly, inefficient, too slow, and potentially dangerous. Although ABP has begun to invest more in renewable energy, they did continue to invest relatively more in gas and oil (Image 1).

ABP has managed to double their investment in solutions to social and environmental problems. In total, the pension fund has invested 65.6 billion in companies that contribute to the Sustainable Development Goals (SDGs). These companies are referred to as Sustainable Development Investments (SDIs). These companies must meet ABP’s criteria for return, risk and costs. The largest share of the SDIs is real estate. A total of €24 billion has been invested in sustainable real estate to meet the demands of SDG 11 - Sustainable cities and communities. These companies qualify as an SDI if it receives either four of five out of five stars on the annual sustainability survey of the Global Real Estate Sustainability Benchmark (GRESB). Additional to this, ABP has expanded its green bond portfolio and currently invests a total of €7,601 million in green bonds.

2020 and beyond

At the end of 2020 they published a new Sustainable and Responsible Investment Policy (2020-2025). They set themselves the target goal to obtain a climate neutral investment portfolio by 2050. With their policy, ABP addressed three major transitions in the coming year. These are

1. Addressing climate change and the need to transition to new energy generation and renewable energy sources;
2. Conservation of natural sources, including increasing scarcity of raw materials and food;
3. The digitalization of society, in which technology plays an increasingly important role.

More concretely, by 2025 ABP strives to have:

• 20% of their total assets under management to go to investments that are qualified as Sustainable Development Investments (SDIs);
• Reduced the CO2-emissions of their equity portfolio by 2025 (relative to 2015);
• Phased out their investments in coal mines and tar sands (under certain turnover conditions);
• Created a more stringent climate criteria in their inclusion policy;
• Invested an additional EUR 15 billion in renewable and affordable energy by 2025;
• Contributed more to CA100+;
• Published climate targets for 2030 in line with expectations in the Dutch Climate Agreement by 2022;
• Invested more in companies with circular business models;
• Amongst others goals. The rest of the goals can be read in their Sustainability and Responsible Investment Policy.

In October 2021, ABP announced it will stop investing in fossil fuel producers. On top of that, ABP will also sell all of their assets in coal producers. They hope to have sold the majority of these by 2023. However these plans do exclude illiquid investments and future contracts for oil and gas. Similarly, these plans may also exclude all the investments that are handled by ABP's subsidiary, APG.

Also, by the end of 2021, ABP has reduced their CO2-emission of their portfolio by 48% (compared to 2015). However, criticism to ABP's plan to "reduce the CO2-emissions of their equity portfolio by 2025" includes the fact that this exclusively includes listed equity, and leaves out corporate bonds, private equity and real estate.

ABP is also a member of Climate Action 100+ (CA100+), an investor-led collaboration that attempts to pressure companies in reducing their CO2 levels by rewarding them financially. Despite good intentions, CA100+ has as of now failed to push 158 of its focus companies forward. More specifically, according to the Carbon Tracker Institute, none of the CA100+ focus companies within upstream oil & gas production or coal & gas-powdered electricity generation have capital allocation plans aligned with the Paris Agreement.

Similarly to previous years, ABP does not mention its exact CO2 emissions level in scope 1, 2 and 3 in its annual report.

NewClimate Institute (NCI) Report

In NCI's report evaluating corporate target settings in the Netherlands, ABP scores low on transparency and low on integrity.

Despite the disclosure on investee emissions being reasonably comprehensive and transparent, ABP does fail to report on its investees' scope 3 emissions, leaving out an estimate of 90% of their GHG footprint. Furthermore, although ABP is committed to reduce the CO2 footprint of listed equity, they fail to include corporate bands, private equity and real estate, excluding almost two-thirds of their total investments. Additionally, whereas ABP is set to divest from fossil fuel producers, their plans have failed to address future contracts, illiquid investments, and the investment strategies of ABP's subsidiary.

ABP scores low on integrity mainly due to the lack of publicly available information on its engagement policies. There are missing details when it comes to the effectiveness of their engagement, nor does ABP have a comprehensive exclusion policy for sectors of products that are misaligned with the Paris Agreement. Additionally, ABP does not report on their own emissions, nor do they have a strategy to address them.

Due Diligence

Due Diligence

Animal welfare

According to Funding destruction of the Amazon and the Cerrado-savannah (2020), ABP has invested nearly 580 million EUR in companies which are either directly or indirectly connected to deforestation in the Brazilian Amazon and the Cerrado-savannah. The majority of their spending went to the China Mengnui Dairy group, who in 2008 went viral over a scandal regarding their deteriorated quality of milk and their mistreatment regarding dairy farmers. The second largest beneficiary of investments provided by ABP was Brazilian meat producer JBS. JBS has been under fire for multiple scandals, such as bribing more than 1,000 politicians, modern-day "slave labor" practices, illegal deforestation, animal welfare violations and mayor hygiene breaches.

ABP scored low on the four assessment pillars for the policy assessments of Dutch pension funds. They marked a 2.5 regarding forest and biodiversity perseverance, a 5.2 regarding human rights, 0.0 points when it came to animal welfare, and then a 6.4 on transparency and accountability.

Human rights

According to Pension funds and land grab - an inconvenient truth (2021), ABP appears to have invested 3.7 billion EUR in 22 companies that are involved in land rights violations. These companies include American Exxon Mobil Corp, in which a total of 381 million EUR has been invested, and Pepsico Inc, which received a total of 715 million EUR.

Out of all Dutch pension funds, ABP is the one to invest the most amount of money in these destructive companies. Some examples of the actions taken by these 22 companies are i) French-based oil producer Total displaced local communities in order to build a new pipeline; ii) Australian Rio Tito bombed two old and sacramental caves in order to expand their mine production; iii) Brazilian iron producer Vale disregarded work safety standards resulting in the deaths of 250 people.

Climate change

According to Fossil fuel versus renewable financing by financial institutions active in the Netherlands (2021) ABP was by far and large one of the biggest investors in fossil energy. At the end of 2020, ABP had invested a total of 8,558 million EUR in the energy industry. 86% of that money went to fossil fuels, whilst the rest (14%) went to renewables. Important to mention here is that on the day this report was published, ABP announced its phase out of investments in fossil fuel producers.

Voter behavior at shareholder meetings

As a stakeholder of multiple corporations, ABP can exercise its influence with voting behavior in shareholder-meetings. Interestingly, and contrarily to their supposed intentions, ABP has repeatedly voted against propositions by companies to bring their policies in line with the Paris Climate Agreement. For instance, on March 17th 2022 ABP voted against Ole Schultz' proposition for Danske Bank to prepare a business strategy that follows the Paris Agreement's target of keeping global warning below 1.5 degrees Celsius. They voted similarly for the Bank of Nova Scotia, the Royal Bank of Canada, the Bank of Montreal and the Toronto-Dominion Bank.

Starting April 26th however, ABP began voting more in line with their own intentions and green policy. However, this does not undo their past voting behavior. Additionally, the shareholder meetings last until May-June so it remains to be seen what the rest of their voting behavior will be.

Scandals and controversies

Menno Snel

On September 1st, 2021, D66-politician and former secretary of state for Finance Menno Snel officially resigned as a board member of ABP. He did this after coming under fire from taking on an chairman position at Nogepa, the Dutch trade association of oil and gas exploration and production. According to critics from for instance protest group Fossielvrij NL (Fossil free Netherlands), this additional role would clash interests with his job at pension fund ABP. Opposition feared that Menno Snel being personally affiliated to the oil and gas industry would incentivize him to continue investing in the fossil industry, despite its ecological harmful implications. After resigning from ABP, Snel continued to work at Nogepa.

Conclusion

ABP is the biggest pension funds in the Netherlands. With a total amount of 528 billion euros worth of capital, ABP has a lot of power. To secure pensions on the long term, the pension fund invests its money in companies and projects all over the world. Since 2015, ABP has set themselves targets to become a sustainable pension funds. Despite achieving things such as increasing their portfolio with regard to renewable energy, it did take ABP a while to set themselves higher goals. In 2021, they announced they would stop investing in fossil fuels altogether, this despite being the largest investor in fossil energy up until that point. As of now, ABP intends to reduce their CO2-emmissions by 40% relative to the base year of 2014. However, they have already achieved a 48% reduction rate, and so one could argue that ABP could afford to set themselves higher reduction goals.

Despite presenting themselves as a green company, ABP is not very transparent about the absolute levels of scope 1, 2 and 3 emissions in its annual report.