Dutch pension fund ABP insisting banks do more to tackle climate change

Banks that claim they are including more green initiatives in their investment portfolios must also demonstrate their commitment, said the Dutch civil servants’ pension fund ABP. The fund is the largest in the European Union and among the largest in the world.

“The financial sector has really lagged,” said Dominique Dijkhuis, the head of investments at the fund. “If you say you’re committing to a climate course and then still actively granting loans to new fossil products, that’s just not aligned,” she told Bloomberg.

ABP now wants to set transparent targets for financial institutions such as banks and insurers. If they fail to meet these targets, ABP will sell off their holdings after a period of three years. Banks must "take their responsibility,” Dijkhuis said. That means they need to look "very critically" at their investments in fossil fuels and “maybe move out.”

In 2021, ABP decided to sell its investments in fossil fuel companies and projects worth 15 billion euros. That operation should be completed by the end of this quarter. The pension fund now also wants to get rid of its indirect exposure to such investments. “We’re concerned that the financial sector is still invested massively in fossil fuels,” Dijkhuis said.

The civil servants' pension fund is not the only one complaining about the extent to which the financial sector is achieving climate targets. For example, Paul Tang, a member of the European Parliament, wants regulations for banks that dictate the level of exposure they have to the fossil sector as a way of reducing climate risks.

Banks that invest in many fossil fuel companies and projects should have to maintain larger financial buffers, he said. Other regulators have also raised similar concerns for some time.