CO2 footprint of Dutch insurers and pension funds ‘clearer’

Written by Paige Perrin

10/10/2024

The CO2 footprint of Dutch insurers and pension funds was ‘clearer’ from 2020-21, according to analysis by De Nederlandsche Bank (DNB).

DNB’s analysis found that at the end of 2021, insurance corporations and pension funds (ICPFs) in the Netherlands invested €514bn directly in listed shares and corporate bonds as well as a further €376bn indirectly through Dutch investment funds.

The analysis revealed that the relative emissions related to economic production over 2020-2021 are lower if indirect investments are included, while absolute emissions are higher.

The emissions are higher as investment institutions have also been included in the analysis.

DNB said that when assessing the CO2 emissions associated with these ICPF portfolios, both direct and indirect investments should be considered to better identify risks of insurance corporations and pension funds.

Based on the most recent available data, the total CO2 emissions financed by the ICPF sector through investments in non-financial corporations increased by 97% in 2020, and by 57% in 2021 when investments through investment funds are included.

This increase was credited to an expected effect and a direct result of the increased portfolio size.

However, when comparing the total portfolio of direct and indirect investments with direct investments only, pension funds and insurers finance relatively fewer CO2-intensive companies in terms of relative CO2 emissions related to economic production.

Its analysis also showed that the inclusion of indirect investments through Dutch investment funds would result in a decrease in the Weighted Average Carbon Intensity of insurers and pension funds by 8% in 2020 and 15% in 2021.

Given this, DNB suggested the average CO2 intensity of the portfolio was lower when indirect investments are included as investment funds invest relatively more in less CO2-intensive industries when compared to direct investments of insurers and pension funds. Overall, the relative transition risks of insurers and pension funds decreased from 2020-2021.

The analysis also revealed that the ICPF investment portfolio in listed equities and corporate bonds increased significantly, from €514bn to €890bn.

In addition to this, the ICPF direct investment portfolio amounted to €312bn in 2021, while the total portfolio, including direct and indirect investments, amounted to €616bn.

DNB said post-2021 CO2 indicators are not yet available, but the data will be updated annually.

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