According to data from the annual report of the Dutch €242 billion scheme for care workers, PFZW’s investments in companies that contribute to the UN’s Sustainable Development Goals (SDGs) have underperformed other equity investments over the past two years.
Since 2020, PFZW has held a separate portfolio of stocks that the pension fund believes contribute to achieving the SDGs.
Since 2022, the fund has been tracking the returns of its €5 billion portfolio separately.
A positive return of 11.9% was recorded in 2023, far below the return of the fund’s €32 billion “regular” developed market equity portfolio (21.5%).
In 2022, SDG stocks performed better, returning -13.2% (compared to -17.9% for “regular” developed market stocks). For 2022 and 2023 combined, SDG stocks posted a loss of 2.9%, compared to just 0.2% for the fund’s traditional equity management.
Underweight Technology
A PFZW spokesman attributed SDG shares’ relatively weak performance to its relatively low exposure to the technology sector, which has performed “particularly well” in 2023.
The spokesman added that structurally, PFZW expects its investments in SDG shares to contribute to the fund’s returns “by their weight”.
The management fees paid on the SDG equity portfolio are also relatively high (0.21% to 0.03% for the developed markets equity mandate), as this is an actively managed mandate, 60% of which is entrusted to UBS Asset Management.
“This means costs are relatively higher than a primarily passively managed equity fund,” the spokesman said.
ABP knows nothing about SDG returns
PFZW is not the only pension fund making separate SDG equity investments.
The Dutch civil servant pension fund ABP has a similar portfolio, but the fund has not disclosed how these investments are performing compared with its other equity holdings.
“ABP is currently developing a process to measure and report performance in a structured and consistent manner. It is too early to announce any results,” an ABP spokesperson told IPE.
The costs of managing ABP’s SDG portfolio are also unknown.
“SDG investments are managed as a single piece of our investment strategy, so we are unable to specifically allocate asset management costs,” the spokesperson said.
PFZW has relatively few investments in SDG stocks: the majority of assets contributing to SDGs are invested in private assets such as infrastructure and private equity.
These investments also performed relatively poorly last year, with the proportion of SDG investments in the overall portfolio falling from 21.5% to 19.9% – again below the target of at least 20% SDG investments that PFZW wants to achieve by 2025.
PFZW invests by far the most in SDG 11 “Sustainable Cities and Communities”, to which US fire extinguisher manufacturer Fire Protection Solutions also actively contributes, as fire extinguishers help prevent fires and improve livability.
