SPF considers sustainability to be a major aspect of the investment philosophy and an integral component of its investment principles. SPF is convinced that the sustainability policy is a way of contributing to sustainable development in the world without necessarily putting pressure on the portfolio’s risk and return profile. The complete sustainability report (PDF) is also included in the SPF 2023 annual report.
In 2023, SPF decided to aim for a carbon reduction of 55% by 2030 compared with the benchmark and scope 1 and 2 carbon data as at 2016. This goal applies to the share, investment grade credit, and high yield US investment categories. SPF also aims to achieve net zero (100% reduction) in carbon emissions by 2050.
In line with European sustainability legislation, the Sustainable Finance Disclosure Regulation (SFDR), the fund also decided to report on a set of twenty different sustainability indicators from the second quarter of 2024. In 2023, SPF also chose for the opt-in regarding the Unfavourable Sustainability Factor Effects Disclosure’ in accordance with SFDR article 4. This is a statement that financial institutions must formulate in accordance with European legislation if they include the most important unfavourable sustainability factor effects, as defined in the SFDR, when taking investment decisions.
Based on the member survey from 2022, SPF further developed the policy in 2023. A second focus theme of ‘Circularity’ was chosen and the exclusions policy was further refined with guidelines concerning companies involved in tobacco production, coal mining and oil extraction from tar sands.
SPF also refined its engagement policy in 2023, by establishing an escalation policy when companies do not respond satisfactorily within the prior set period, which can lead to disinvestment in that company.
We explain the various pillars of the sustainability policy briefly below
SPF endorses the OECD guidelines for multinational companies and the UN’s Guiding Principles on Business and Human Rights. The fund focuses on specific social developments that are important to members and that form a high risk for the investment portfolio. Against this background, SPF aims to work particularly on the sustainability theme of climate change, focusing on two SDGs, namely: SDG 7 (affordable and clean energy) and SDG 13 (climate action). For the ‘Circularity’ theme, the focus is on two SDGs, namely: SDG 6 (clean water and sanitation) and SDG 12 (responsible consumption and production). The ‘Circularity’ theme will first be set out in more detail before being implemented in the portfolio.
Where possible, SPF manages and evaluates investments according to ESG factors. ESG stands for Environmental, Social and Governance. The fund integrates ESG aspects in the various investment categories in which SPF invests and includes them when making investment decisions.
SPF has an active engagement programme. The fund aims to encourage companies to take steps with respect to social and sustainability issues. This is done in two ways: proactively and reactively.
The objective for proactive engagement is to simultaneously encourage multiple companies (often within a given sector) to make further improvements. Reactive engagement focuses on influencing one company. For companies that do not respond within the prior set period, SPF has established an escalation policy, which can result in disinvestment in the company concerned.
SPF has outsourced engagement to Columbia Threadneedle Investments (CTI), which acts as an engagement party on behalf of several institutional investors. The SPF engagement programme focuses on holdings in real estate and other shares and holdings in the company bond portfolios investment grades and high yields.
In 2023, CTI held discussions with companies from SPF’s portfolio in 27 countries. This led to positive changes (achieved milestones) 74 times. CTI achieved these milestones on topics including climate change, employment conditions, company governance and health.
SPF uses a specific voting approach to monitor material affairs of all listed companies and real estate companies in which the fund invests. Material affairs are affairs that will probably have a considerable effect on the company’s capacity to create long-term value. SPF’s policy for good governance focuses on protecting interests as a shareholder while at the same time living up to its responsibility in that role. Like the engagement policy, CTI also implements SPF’s voting policy.
In total, SPF voted at 930 meetings in 2023. The fund voted some 68 times on climate-related proposals, of which 14 concerned proposals regarding the transition as a consequence of climate change.
SPF does not invest in companies that fail to act in accordance with the United Nations’ Ten Global Compact principles. The fund also excludes producers of controversial weapons such as nuclear, biological and chemical weapons, depleted uranium munitions and white phosphorus munitions. SPF also excludes companies that are involved in tobacco production (turnover limit >0%) and companies involved in coal mining and extracting oil from tar sands (turnover limit >5%). SPF also excludes companies and countries that conduct activities that the United Nations, the European Union or the Dutch government deem unacceptable. These are mainly issues concerning human rights and weapons. To identify companies and countries for exclusion, Morningstar Sustainalytics carries out screening on behalf of the fund to establish the companies and countries in which the fund should not invest. Morningstar Sustainalytics screens both developed and emerging markets on the above criteria for SPF.
At end 2023, SPF excluded 174 companies and 14 countries from its investment universe. At end 2022, 106 companies and 14 countries were excluded. The increase in the number of excluded companies was a result of the expansion of the exclusion policy as explained above.
SPF publishes an Annual Report to ensure transparency about the sustainability policy and how it is implemented. The report indicates how the fund handled sustainability that year and the fund’s achieved results in this area. SPF also publishes an annual overview of the outcomes of the total investment portfolio on its website as well as the results of votes at shareholder meetings and the engagement policy. The SPF sustainability policy can also be found there. To conclude, the SPF Newsletter and the website regularly feature items on the sustainability policy.
SPF signed the Covenant on International Socially Responsible Investment (IMVB-covenant in Dutch) in 2018. In doing so, SPF pledged to anchor the OECD guidelines and UN Guiding Principles within the pension fund policies, as well as when outsourcing to external service providers and when monitoring and reporting on this topic. SPF does this via this annual report.