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Analysis: Dutch, New York pension funds go green

pension funds
By Paul Mackintosh   
October 27, 2021

With COP26 just around the corner, it’s probably appropriate to talk about GREEN, or the Global Real Estate Engagement Network, the alliance of six major Dutch pension funds and three execution partners committed to accelerating sustainability in the real estate sector.

GREEN’s founder members PF Detailhandel, Pf Achmea, Pf Philips, Pf Nedlloyd, Pf TNO, and Pf Schilders together amount to some US$81.5 billion of assets under management. It operates with the support of advisory firms Finance Ideas and Almazara and environmental, social and governance-focused asset manager Vert Asset Management. GREEN also declares itself aligned with the Institutional Investors Group on Climate Change, the $45 trillion-plus investor coalition also committed to address climate concerns.

According to GREEN’s website, the real estate sector is responsible for 30%-40% of global carbon emissions, and is exposed to significant physical and transition risks. However, in GREEN’s view, “the real estate sector is not on track to manage these risks effectively”. It says that some 29% of global energy consumption is building-related, and that investors in the real estate asset class “run significant unmanaged and unrewarded financial risk and contribute to negative impact”.

However, GREEN says that the sector can be decarbonised far more easily than other sectors and “without major impact on business models”. The group is committed to use its investment muscle to press its existing or prospective investees to do just that.

GREEN is hardly alone. On October 20, the New York City Employees’ Retirement System and New York City Teachers’ Retirement System agreed to join a common climate change investment plan. The New York City Board of Education Retirement System is also expected to vote on the plan imminently.

The joint plan commits the three pension funds to achieve net zero emissions by 2040, and to double their climate change investments to some $8 billion by 2025. Overall, the funds will target $37 billion of climate change solution investments by 2035. This comes as New York City Mayor Bill de Blasio promotes the goal of all the city’s pension funds achieving $50 billion in climate change investments by 2035.

Once again, these moves demonstrate that, despite the foot-dragging and denialism evident elsewhere – as with French far-right presidential candidate Marine Le Pen’s commitment to tear down France’s wind turbines if elected – the momentum of sustainability-focused investment among global institutional investors and asset managers alike looks irresistible.

The most fiscally accountable, bottom line-focused, pragmatic and realistic investors are the ones most committed to respond to climate change. Those against it are those most motivated by ideology and know-nothing populist ambitions.

Whether these are hopeful signs or not is an open question; they’re certainly real ones.