ABP, Heerlen, Netherlands, will exclude tobacco companies and nuclear weapons manufacturers from its investments, selling about €3.3 billion ($4 billion) in holdings.
The €405 billion pension fund announced Thursday it had reached the decision after consultation at board level and based on insights by participants, employers and special interest organizations.
The pension fund aims to sell its investments in tobacco and nuclear weapons manufacturers within one year. How proceeds will be reinvested could not be learned by press time.
"Investments in tobacco and nuclear weapons have been a dilemma for us for quite some time," said Erik van Houwelingen, chairman of the ABP executive committee for investment policy, in the announcement. "Changes in society, also at an international level, were a reason for ABP to put the topic on the agenda again. We felt a need for a broader discussion."
A new assessment framework for product exclusions has also been developed for ABP, to be used as a supplementary instrument in its sustainability policy, said Mr. van Houwelingen. "This resulted in ABP's decision that in addition to the existing exclusions, tobacco and nuclear weapons no longer fit in with our sustainable and responsible investment policy."
The framework adds a number of new criteria that may result in additional exclusions. The four new criteria cover products that by definition are harmful to people; if the fund's influence as a shareholder cannot change anything about that fact; if the product no longer existing has no harmful effect; and if a worldwide treaty exists for the purpose of eliminating the product.
ABP will sell out of investments related to manufacturers of tobacco and nuclear weapons and will refrain from investing in these products and companies in the future.
"In the past, healthy returns were achieved on tobacco and nuclear weapons. However, ABP believes that the outlook has changed. Additionally, ABP sees options for excellent returns on other investments. This is why the fund expects that missed profits, if any, due to this decision will be very limited," said the announcement.
The fund and its in-house manager, APG, will implement the decision in its sustainable and responsible investment policy.
A spokeswoman for ABP could not be reached for comment by press time.