Socially responsible investing

Return goes into your pension

All pension funds invest the contributions that have been paid into them. The return they make on those investments enable them to pay you your pension when you retire – preferably a pension that keeps up with inflation so your spending power stays intact. After all, it is likely that thirty years from now one euro won’t buy you as much as it does today.

Prudent investment policy
NN CDC Pensioenfonds has in place an investment policy (Dutch only) with a long-term horizon. While part of your eventual pension benefits will be paid from contributions paid into the pension fund, the largest part will be funded from return on the pension fund's investments. To ensure that there will be sufficient return, NN CDC Pensioenfonds has in place a prudent investment policy which is neither fully risk averse nor fully risk prone, but rather a mix of the two. Based on this policy, the pension fund works with two investment portfolios: a matching portfolio and a return portfolio.

Matching and return portfolios
The matching portfolio accounts for approximately 60% of the pension fund's invested assets. The pension fund uses this portfolio to match its investments with its current and future commitments. This portfolio consists of mainly highly rated European soevereign bonds, which have relatively low risk profiles.

Distribution matching portfolio

_{Source: Annual Report 31 December 2021}

_{Source: Annual Report 31 December 2021}

Socially responsible investments
NN CDC Pensioenfonds feels socially responsible and therefore has in place a policy for socially responsible investments (SRI). At present, our SRI policy entails an exclusion list for countries we do not invest in as well as an exclusion list for companies we do not invest in. Moreover, the mandate for equity in developed markets is conducted through specific proxy voting and engagement activities – in this respect, the fund participates in the State Street Global Advisors stewardship programme. The fund does not have in place a system to monitor the relevance and materiality of environmental, social and governance factors, or the methods needed to take such factors into account. This is because the pension fund considers the cost of such a system disproportionate to the nature, scale and complexity of the fund’s activities.

The investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.

One of the specific topics of the pension fund's SRI policy is sustainability. The pension fund's policy does not include an assessment of the adverse effects of its investment decisions on sustainability factors. This means the pension fund does not conduct an ESG due diligence regarding the identification and prioritisation of the adverse effects and indicators of its investment decisions on sustainability factors.

There are several reasons why the pension fund does not do this. In this respect, the pension fund makes a distinction between the internally and externally managed investments and between sovereign/semi-sovereign bonds, corporate bonds and equity.
The pension fund does not consider an ESG due diligence policy appropriate with regard to sovereign/semi-sovereign governments in EU countries. For companies, on the other hand, an ESG due diligence is considered appropriate. ESG due diligence reviews are currently not being conducted with regard to internally managed investments. This is because the pension fund considers the cost of such a policy disproportionate to the nature, scale and complexity of the work involved. When selecting an external party, an assessment is made of the overall SRI policy adopted by the party or fund in question. The ESG due diligence policy is not included in this process at present, but this could change in the future, when SFDR has been implemented by market parties.