An open letter to our pension fund on sustainable investments
Pension funds have a great influence on our future, but they often invest in projects affecting human rights or the environment. Following the example of other Dutch universities, Pieter van der Zaag, Leon Hermans, Angeles Mendoza, Michael McClain and ninety-three colleagues wrote an open letter to our pension fund, asking for more just and sustainable investments.
The Dutch financial landscape differs from that of many other countries because of its unique pension system. Retirement provision in the Netherlands is organised through a combination of pay-as-you-go funding for the state pension (‘AOW’) as the first pillar, and capital funding for the occupational pension as the second pillar. The investment risk that pension funds take on a collective basis in the second pillar (both before the retirement date and while the pension is in payment) is the basis for assuring that old people can continue to live comfortably after they stop working. Amounting to a staggering 1400 billion (€ 1.4 x 1012) euros, capital-funded pension assets amount to twice the Dutch gross national product. Much of this money is invested in companies that have the potential to co-determine what the future – the time when current employees will retire and a next generation takes over – looks like. Pension funds are intrinsically forward-looking and focusing on the long-term. This is why the investments done with pension savings can and should be concerned with helping create the transformations to sustainability needed to continue making it possible for everyone (humans and more-than-humans) to live well on this planet. So you would think. But unfortunately this is not the case.
In fact, almost the opposite is happening. It seems that short-term returns continue to be much more important in guiding the investment choices of ABP (just like that of other pension funds). ABP is the Dutch pension fund for employees of the government and education sectors. All IHE Delft employees are members of ABP; a fixed percentage of our salaries is automatically (and compulsorily) deducted and goes to ABP. This explains why we are concerned about how these funds are invested. Dutch pension premiums for instance contribute to destroying ecosystems in the Amazon, which are vital for human well-being worldwide. According to a report by Dutch Association of Investors for Sustainable Development, Dutch pension funds also support mining project in developing countries, with not much consideration of the negative effects these have on water, ecosystems and the communities near mining sites. Moreover, ABP and other pension funds often support the oil, gas and coal industries, which are major contributors to the emissions that are disrupting the global climate. This is putting millions of people at risk, in addition to contributing to the decline of biodiversity. It can also not be ruled out that pension savings are invested in unsustainable dam projects in the global south. Another, perhaps more hideous, example is one that is close to our water heart: ABP indirectly invests in a company (NETAFIM) that claims to save water by producing and selling drip irrigation systems, the use of which supposedly increases water use efficiencies in agriculture. Yet and paradoxically, the sale and adoption of drip irrigation systems often results in increasing absolute water scarcity, while also exacerbating inequity in access to water.
All this is deeply ironic. After all, for us, staff members of IHE Delft, our work is all about helping design and push for more sustainable and equitable ways of using and otherwise engaging with water. Together with our students, partners and alumni, we hope to help create a generation of professionals, scholars, entrepreneurs and activists who are equipped to make water decisions that support rather than undermine longer-term goals of sustainability; that promote equity in access to water and sanitation services; and that mobilize water as a tool for wider goals of peace and social justice. Yet, through the pension fund to which we mandatorily transfer part of our retirement savings, we are investing in ventures that work against these objectives. All this without having direct influence on how ABP makes its investment choices.
Investing in portfolios that have numerous negative environmental and social impacts, and which contribute to human rights violations is unethical and unsustainable. We cannot accept that our money goes to, and our future living is premised on, the destruction of the environment and the suffering of people in other countries. Instead, we want ABP to invest all our pension savings in sustainable companies or in companies that use it to put sustainability at the core of their business. ABP itself claims that investments can both be responsible and profitable.
Inspired by and in line with what academic staff of other universities have done, ninety seven staff members of IHE Delft have therefore written a letter to the chair of the board of directors of the ABP to express our concern. The letter ends as follows:
“Working at an international institute based in The Netherlands with a very good reputation, especially in the Global South, we have to live up to our vision, mission and ambition. Being connected to a pension fund and asset manager that mirrors our mission and ambition is not only essential for us, but also beneficial to ABP and, of course, to the people that will not be affected by unethical and unsustainable investments.
Imagine what a difference all the ABP money could make in this increasingly vulnerable and unequal world if invested responsibly and wisely! We are very much willing to have a dialogue with ABP about the issues raised.