ABP is not the first pension fund to get out of fossil fuels. Last month, PME announced that it has sold all fossil assets. That is therefore already further than ABP, which expects to have sold the majority of its fossil investments by early 2023.
ABP’s decision will not immediately have a clear effect, says Corné van Zeijl, stock market analyst at asset manager Actiam. “ABP is not so big that it puts pressure on the share price of companies. But the trend has an impact. The Netherlands is leading the way, several large funds, especially in Europe and now also in the US, are stepping out of fossil fuels. That will set the prices.” under pressure.”
Fieke van der Lecq, professor of pension markets at VU Amsterdam, says fossil producers sin stocks could become. These are shares of companies engaged in products and activities that are seen as unethical, such as tobacco, weapons and gambling. Many investors do not want to invest in that. As a result, the price is low, but the returns are high. Investors, attracted by the high returns, invest in it.
From ‘out of stockcompanies’ run the risk of being tackled by regulation. For example, tobacco is strictly regulated in the Netherlands, companies are not allowed to advertise it and hefty excise duties are levied. Fossil companies also run the risk of a significant CO2 tax. That would affect the revenue model of those companies.
Mathijs van Dijk, professor of Finance at Rotterdam School of Management, also sees similarities between the sin stocks and fossil fuel companies. “The long-term effect of ABP’s move may be that it will become more difficult for them to raise money on the capital market,” says Van Dijk. “CO2 seems to be a new category out of stock to become. There are more and more investors saying they are leaving the sector.”