Philips Pensioenfonds makes conscious 'responsible' choices in the policy for responsible investments. For example, by excludiing specific types of companies we do not want to invest. But also by investing part of the portfolio in companies that can make a positive contribution to themes such as 'health and well-being' and 'responsible consumption and production'. Finally, it is examined whether sustainability aspects influence the risk and return of our investments.
We will explain these three forms of responsible choices further below.
Philips Pensioenfonds has laid down in its policy for responsible investments in which companies and countries the Fund does not wish to invest in. A distinction is made between companies and countries.
Philips Pensioenfonds refuses to invest in companies that are involved in the production of controversial weapons: weapons that do not distinguish between military and civilian targets, and that in many cases cause casualties long after the conflict has ended.
International laws and regulations have made most of these controversial weapons illegal, or restrict their use. Philips Pensioenfonds has a list of five types of weapons: Anti-personnel mines, Biological weapons, Chemical weapons, Cluster munitions and Nuclear weapons. Similarly, the Pension Fund does not invest in companies that produce tobacco products: companies that generate revenue from manufacturing cigarettes, for example. The Fund also excludes companies that derive a large part of their turnover from polluting energy sources. These are companies that generate more than 25% of turnover with activities in oil tar sands (extraction) and/or coal (extraction and/or energy generation).
Lastly, the pension fund sometimes refuses to invest in companies that violate the international guidelines for corporate social responsibility. Philips Pensioenfonds applies the Global Compact principles, the OECD guidelines and the UNGPs for this. Before Philips Pensioenfonds excludes a company, it first initiates a dialogue with that company (see 'care for investments'). If that dialogue does not yield the desired outcome, the pension fund can decide to exclude the company for its violation of the international guidelines.
The pension fund determines what companies to exclude on an annual basis.
The pension fund also refuses to invest in government bonds of countries if either the country as a whole or individuals who are part of its government have been declared subject to substantial international sanctions, and of countries that are notable laggards when it comes to ESG standards. The pension fund determines what countries to exclude (for government bonds) on an annual basis. In addition, companies are excluded that are controlled by the governments of these excluded countries (state-owned companies).
2. Opting for sustainable investments
Philips Pensioenfonds chooses to organize part of the portfolio in such a way that it only includes investments in companies that make a positive contribution to sustainable aspects. For example, by investing specifically in a company that invests a lot in sustainable energy sources. To this end, the Fund is in line with four sustainable development goals (or SDGs) of the United Nations. These have been selected because we think they are suitable for Philips Pensioenfonds and there are good investment opportunities around these themes.
The four goals that Philips Pensioenfonds wants to focus on are:
3. Good health and well-being
11. Sustainable cities and communities
12. Responsible consumption and production
13. Climate action
This part of the responsible investment policy cannot be realized overnight. This first requires research. For example, how will you measure the contribution of an investment to these themes? And which investors can we best engage for this? How do we keep the implementation simple and the costs acceptable? Our intention is to realize this implementation in the course of 2021.
3. Involving sustainability in investment choices
Sustainability aspects (such as the environment, social aspects and governance) can influence the risks of an investment, both positively and negatively. When making investment choices, it is always assessed whether the expected return is in balance with the associated risks. In this way too, sustainability aspects play a role in our policy and its implementation.