DNB survey reveals Dutch pension funds unprepared for ESG risks

A recent survey conducted by Dutch pension regulator DNB has revealed that 25 out of 39 pension funds have limited or no awareness of the environmental, social, and governance (ESG) risks associated with their investment portfolios. This poses a challenge as Dutch law mandates pension funds to report on these risks.  

A recent survey conducted by Dutch pension regulator DNB has revealed that 25 out of 39 pension funds have limited or no awareness of the environmental, social, and governance (ESG) risks associated with their investment portfolios. This poses a challenge as Dutch law mandates pension funds to report on these risks. 

Despite the fact that nearly all pension funds now incorporate ESG considerations into their investment policies and 75% have ESG trustees on their boards, there is a need for greater diligence in identifying the potential impact of ESG risks on their investments.  

Michelle Ummels, the ESG risk officer at DNB, emphasized the importance of understanding these risks as the first step in ESG risk management. Only once pension funds have assessed the ESG risks they face can they formulate strategies to mitigate them. The survey results did not surprise DNB, as they align with earlier findings from smaller samples. 

ESG risks faced by Dutch pension funds encompass issues like the impact of climate change and biodiversity loss on the companies they invest in. These risks are substantial, with exposures extending to investments in areas with severe water scarcity, fossil fuels, critical raw materials, and sectors sensitive to the energy transition. Additionally, the IORP II Directive, in effect since 2019, legally obligates pension funds to manage ESG risks. 

DNB is actively working on developing a regulatory framework for ESG risk management, with a focus on providing information and encouraging pension funds to take action until 2024. Beyond that, from 2025 onward, they will establish standards and take proactive measures against pension funds that do not adequately address their ESG risks. 

Read more: https://www.ipe.com/news/dutch-pension-funds-in-the-dark-on-esg-risks-says-dnb/10069468.article