Pensioenfonds Detailhandel allocates €3bn to credit market

Pensioenfonds Detailhandel has allocated €3bn to the credit market in what is its third significant sustainable investment based on the United Nations Sustainable Development Goals (SDGs).

Having worked closely with index provider FTSE Russell and asset manager, BlackRock, the €32bn fund has adopted the custom-built FTSE Euro Credit SDG-Aligned Index.

The new index is designed to provide a diversified bond benchmark. In 2019 and 2020, the pension fund collaborated with the same partners to introduce indices for developed and emerging market equities portfolios representing a value of over €11bn. With the €3bn allocation to the credit market, almost half of the assets under management of Pensioenfonds Detailhandel are now in line with selected SDGs.

Pensioenfonds Detailhandel aims to provide a good pension to its 1.2 million participants and is convinced that responsible investing also means creating long term value. The pension fund encourages the companies in which it invests to deal responsibly with their employees, society and the environment. A recent survey by Maastricht University among the fund's participants showed that there is great support for making the investment portfolios more sustainable.

The FTSE Euro Credit SDG-Aligned Bond Index measures the performance of fixed-rate, EUR denominated, investment-grade credit bonds, incorporating a tilting methodology that adjusts index weights according to the specified UN’s SDG framework. The SDGs considered most important by the participants of Pensioenfonds Detailhandel are included in this index: Decent work and economic growth (SDG 8); responsible consumption and production (SDG 12); climate action (SDG 13); and, peace, justice and strong institutions (SDG 16).

This results in a benchmark that achieves the following when compared with the market-capitalisation weighted ‘parent’ index for corporate bonds only: Carbon emissions reduction (69 per cent); green bond allocation increase (69 per cent); and, fossil Fuel reserves reduction (62 per cent). An additional index overweight is applied to green bond constituents in the benchmark as defined by the Climate Bond Initiative.

Commenting, Pensioenfonds Detailhandel chairman, Henk van der Kolk, said: “We still have a lot to do, but this is a very positive step: about half of our investment portfolio is now in line with the SDGs.”

FTSE Russell CEO, Arne Staal, said: “By building a customised benchmark that applies specific UN Sustainable Development Goals to the Euro Credit market, FTSE Russell is continuing its long and cutting-edge partnership with Pensioenfonds Detailhandel. The FTSE Euro Credit SDG-Aligned Bond Index applies a simple and transparent set of criteria that increases the fund’s exposure to bonds issued by companies and sub sovereign entities scoring highly on issues such as decent working conditions, climate action and sustainable consumption and production.

“FTSE Russell is building the next generation of sustainable fixed income indices that meet diverse investment objectives such as climate risk mitigation, ESG screening or alignment with UN SDGs.”

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