Dutch pension fund Philips Pensioenfonds has partnered with BlackRock and Qontigo to launch a responsible index aligning to four of the United Nations’ Sustainable Development Goals (SDGs).
The iSTOXX PPF Responsible SDG index will act as the new benchmark for the pension fund’s €4.5bn developed market equity portfolio managed by BlackRock.
The move came after Philips Pensioenfonds surveyed 5,000 of its members who wanted more engagement and voting as well as to invest in companies that contribute to a sustainable future.
The four SDGs most important to the members comprise of Good Health & Wellbeing (SDG 3), Sustainable Cities & Communities (SDG 11), Responsible Consumption & Production (SDG12) and Climate Action (SDG 13).
As a result, the index was constructed to increase the overall weighting of companies to the four selected SDGs by at least 20%, increasing the exposure from 15% to 35%.
The portfolio will also reduce greenhouse gas emissions per euro of revenue by 30% compared with the standard benchmark.
BlackRock added the indices were built using multiple ESG data sets including the Sustainable Development Investment Asset Owner Platform data which classifies companies based on their share of revenues that contribute to specific SDGs.
The index also excludes companies that are obstructive to the four goals while using additional ESG screens to reduce the carbon intensity of the portfolio.
Monique Donders, country head BlackRock Netherlands, said: “Together, we have come up with an innovative approach that achieves meaningful SDG alignment without sacrificing on cost or risk/return profile.
“It clearly shows that Dutch pension funds are again at the forefront of using their portfolios to combine positive sustainable as well as financial outcomes for their beneficiaries.”
Hamish Seegopaul, managing director for R&D ESG and quantitative indices at Qontigo, added: “The integration of multiple sustainability objectives in a risk-controlled investment framework requires careful consideration of the inherent trade-offs.
“We take a consultative and collaborative approach in working with clients and partners to ensure we can develop index solutions targeted at achieving specific outcomes.”
Philips Pensioenfonds said it would seek to integrate the four SDGs into more asset classes in the future.
SDG alignment is an increasing trend in the Dutch pension fund space. In November, Pensioenfonds Detailhandel partnered with BlackRock and FTSE Ruseell to create an index fund offering exposure to euro-denominated investment grade bonds that are aligned to four SDGs.
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