A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
B] The Issue
Over 90% of European investors polled in the run up to the 21 January of US president Trump said they were extremely or somewhat concerned over the state of ESG and sustainability practices in the US. However, they still intend to either maintain or increase their impact allocations, a survey by Pensions for Purpose shows.
C] Details
Pensions for Purpose, a UK-based industry body, says the results are significant because, although European and US investors often follow distinct paths on sustainability issues, 83% of survey respondents said US sustainability practices would have some influence on their decision making, even if none said that influence was critical. The survey of 44 individuals at asset managers, asset owners and consultants from Europe, including the UK, was carried out in November and December 2024, in the wake of the November’s US presidential election.
D] Concerns
Investor concerns over the issues raised surrounding sustainable investing are unlikely to be assuaged by president Trump’s first actions on returning to office for a second term. On his first day back in power, he followed through on earlier pledges, by ordering the US to pull out of the Paris climate change agreement and the World Health Organisation, while also encouraging expansion of the US oil and gas industry. Trump has also suspended US foreign assistance programmes for 90 days to review their alignment with his policy goals.
Despite worries over the direction of travel in the US, the survey does indicate continuing commitment to ESG goals and sustainable investing among European investors, Karen Shackleton, founder and chair of Pensions for Purpose, told Impact Investor. The survey showed that 58% of respondents planned to increase their impact investment allocations over the next 12 months, while the remaining 42% said they would maintain current levels of impact allocations, but not decrease them.
Shackleton said that indicates a commitment to the sector and optimism over the returns it could generate. “It is a reassuring insight from the survey that European and UK investors still see ESG and sustainability in a very different light to the narrative that’s coming out of the US. I would have been deeply concerned if that had not been the case, because that wouldn’t have aligned with some of the conversations that we’re having,” she said.
There was also continued enthusiasm among European investors for establishing impact goals, with 61% of organisations having already set, or planning to set, specific targets for impact investments. That does leave 39% without plans to set targets – Pensions for Purpose said that pointed to an opportunity for greater engagement and education.
E] Engagement
“I think impact investing will still be of interest to investors on both sides of the Atlantic, because of the return opportunity. That won’t fundamentally change. But where the change in policy in the US could have an impact is around engagement policies and we’re already seeing that to an extent,” Shackleton said.
One notable example is the withdrawal of some US-based investment firms with global reach from the Net Zero Asset Managers Initiative (NZAM), which was set up to align big players in the global asset management industry with climate goals. The departure of Blackrock, the world’s largest asset manager, from the coalition in early January prompted NZAM to suspend its activities while the organisation sought to adapt its aims to better tally with the reshaped objectives of US firms adapting to president Trump’s pro-fossil fuels agenda.
Trump is also rolling back diversity, equity and inclusion (DEI) policy introduced under his predecessor Joe Biden, revoking a Biden directive aimed at preventing discrimination based on gender identity or sexual orientation. He has also said that there should be only male and female genders with no scope for changing gender designation.
Shackleton said such roll backs could yet have a beneficial side, if they put the underlying themes in the spotlight, as recent Pensions for Purpose research suggested pension funds were not considering DEI sufficiently when looking at their underlying investments. “It can be good to have somebody with a fairly extreme opposite view to your own, because it suddenly brings the topic back into people’s minds as one for discussion, particularly with things like diversity, equity and inclusion,” she said.
F] Finally
Shackleton said that pension funds need to think carefully about whether the global asset managers they invest with could still deliver the outcomes they are seeking in terms of sustainable and impact investing. “If they don’t have confidence that their asset manager is going to be able to deliver to those criteria, then they need to switch away from a global manager towards a more UK focused or European focused manager who can deliver,” she said.
G] Encore: Financial materiality forcing nature biodiversity into sustainability
“Financial materiality” is forcing asset owners, including pension funds, to incorporate nature and biodiversity into their sustainability strategies, according to a report by Pensions for Purpose. The report found that 65% of asset owners are now incorporating nature and biodiversity into their sustainability strategies, while a further 20% already plan to do so.
The research highlighted the pressing need for the financial sector to confront biodiversity risks, with asset owners increasingly aware of the dangers of biodiversity loss. Pensions for Purpose research manager, Bruna Bauer, claimed it was financial materiality, rather than regulatory pressure, that has emerged as the primary reason for asset owners to act. “Biodiversity loss poses tangible risks to investments, including supply chain vulnerabilities and ecosystem fragility, prompting schemes to proactively protect their portfolios”.
“Asset owner respondents have realized ignoring nature-related risks is not just a sustainability issue but has financial consequences too, leading to the integration of nature into sustainable strategies before more regulation mandates it.” Despite progress, the report found that asset owners still face considerable challenges in reporting nature-related risks, not due to data availability but data variety and interpretation.
Unlike climate metrics, such as carbon emissions, which are more straightforward, biodiversity assessments demand a nuanced approach, blending qualitative and quantitative insights. It also found that many asset owners are still building internal capacity, exploring suitable metrics and forging partnerships with academic institutions and non-government organizations to navigate these complexities.
Commenting on the lack of resources, Pensions for Purpose chair, Karen Shackleton, said the report served as a “wake-up call” for the investment industry to address biodiversity loss proactively. “With the Taskforce on Nature-related financial disclosure (TNFD) framework gaining momentum, asset owners must leverage existing climate efforts and structures to build comprehensive strategies for biodiversity.”
The report also emphasized the connection between nature and climate within sustainability strategies. Asset owners increasingly view nature-based solutions as vital for carbon sequestration and climate resilience. However, most funds still lack dedicated governance structures for nature, with biodiversity often embedded within broader ESG policies focused primarily on climate.
To address this gap, many schemes are expanding teams or relying on external expertise to inform trustee decision-making. “COP16 underscored the urgency of this mission, highlighting the critical need to protect 30 per cent of the world’s ecosystems by 2030. Current efforts fall far short, with developing nations, which host most of the global biodiversity, advocating for increased international financial support. Asset owners have a unique opportunity to align their strategies with global sustainability goals, ensuring portfolio resilience and ecological preservation.”