The €499 billion ($607.6 billion) Dutch pension giant ABP, Europe’s largest public sector pension by assets under management (AUM), has joined several other European institutional investors this week in pledging to decarbonize its portfolio by joining the Paris Aligned Investment Initiative’s Net Zero Asset Owner Commitment.
The Paris Aligned Investment Initiative is a collaboration among global investors to align their portfolios and activities to the goals of the Paris Agreement, which aims to limit the increase in global temperature this century to 2 degrees Celsius above pre-industrial levels. The investors will use the Net Zero Investment Framework to meet their decarbonization goals.
Also signing up to the framework with ABP were UK conservation charity The National Trust, the Church of Sweden, the South Yorkshire Pension Fund, the Wiltshire Pension Fund, and TPT Retirement Solutions. The six new signatories join 38 asset owners and asset managers representing $8.5 trillion in assets that are already using the framework, according to the Institutional Investors Group on Climate Change (IIGCC), which established the Paris Aligned Investment Initiative in 2019.
Under the asset owner commitment, the pension funds aim to decarbonize their investment portfolios by 2050 or sooner and increase investment in climate solutions. They are also required to set interim targets for decarbonization and investment, undertake policy advocacy and engagement, and vote in line with net-zero goals. Meanwhile, the framework provides metrics and methodologies for four asset classes—sovereign bonds, listed equities, corporate fixed income, and real estate—with private equity and infrastructure to be added in the near future.
“Climate change is one of the biggest issues facing the world today. We at ABP are taking actions in our responsible investment policy to counter it,” Loek Sibbing, an ABP board member, said in a statement. “The Net Zero Investment Framework commitment will help ABP on our pathway to an effective net-zero investment strategy.”
The Paris Aligned Investment Initiative also said it is working with the Partnership for Carbon Accounting Financials (PCAF), a group of financial institutions developing a way to measure and disclose greenhouse gas emissions of loans and investments. The two groups will develop greenhouse gas accounting methodologies for asset classes such as sovereign bonds, accounting for carbon removals/sequestered emissions and technical issues such as aggregation of Scope 3 emissions.
In June 2020, ABP pledged to reduce carbon dioxide emissions in its overall portfolio by 40% compared with 2015, invest €15 billion in sustainable and affordable energy, and invest 20% of total assets in the United Nations’ Sustainable Development Goals (SDGs) all by 2025. It said also set a goal to stop investing in coal for generating electricity in OECD [Organisation for Economic Co-operation and Development] countries by 2030.