Sustainability through company pension schemes? The influence of codetermination actors on investment strategies

This cross national comparative research is commissioned by the (opens in a new window)Hans Böckler Foundation.

Research Team

(opens in a new window)Associate Professor Karen Anderson, UCD

Natascha van der Zwan, N.N. Universität Leiden (Postdoc)

Tobias Wiß, N.N. Johannes Kepler Universität:(Postdoc)

Research Outline

How can codetermination actors influence sustainable investments in company pension schemes? Considering this topic from an international comparative perspective is of crucial importance in view of the enormous increase in investments of capital-based pensions in EU countries to EUR 6.9 trillion in 2018 (OECD). However, there is a lack of studies that investigate - in an environment that forces the strengthening of capital-based pensions - to what extent actors of co-determination influence investment decisions and use them for non-financial purposes. Investing in sustainable investments, that is, taking ecological, social and corporate governance aspects into account, can be a means of realizing the union goal of a sustainable, just and, above all, social society. It is also important to clarify which standards of social-ecological investments exist and who regulates them and how.

Aims and Objectives

The planned project analyzes a) what influence actors of co-determination have on investments in company pension schemes, b) to what extent they take into account socio-ecological aspects and c) whether those at the beginning of the investment chain (the series of processes that convert money into investment objects) Preferences match the final investment. Answers to this are particularly relevant for Germany in view of the increasing importance of company pension schemes. The comparison with the Netherlands and Denmark, both countries with quasi-universal company pensions, strong trade union influence and substantial sustainable investments, provides important insights and recommendations for political actors in Germany.

The central research question is: How can employees and codetermination actors influence sustainable investments in company pension schemes? This results in three sub-questions:

1) How are employees represented in the administration of capital-based company pension schemes and what role does co-determination play in determining investment decisions? (Work packages 1, 3 and 4)

2) To what extent do codetermination actors consider social, ecological and corporate governance issues when determining their investment preferences? (Work packages 1-4)

3) Are the investment preferences of those involved in co-determination formulated at the beginning of the investment chain also reflected in the final investment decisions at the end? (Work package 4)

It is expected that those involved in codetermination will increasingly concern themselves with investment decisions and their effects in the course of strengthening capital-based company pension systems. This seems to be more pronounced in the Netherlands and Denmark. Our working hypothesis is therefore: The higher the extent of participation in company pension systems, the greater the influence of participation actors on investment decisions should be. As a result, the expectation is to find a stronger focus on social, ecological and corporate governance investments.

 Work Packages

Four work packages are designed to answer the research questions:

1. The extent of capital-based company pension schemes in Germany, the Netherlands and Denmark is recorded. The main aim here is to analyze what role these systems play for individual retirement income, which and how many people are covered by this, and how high the contributions are or by whom they are paid.
2. The volume and structure of sustainable investments in all three countries is examined.
3. This work package is devoted to the institutional design of company pension systems in all three countries. The aim is to define the legal framework and state regulation with regard to sustainable investments. Another aim of this work package is to clarify co-determination, i.e. what rights of participation and decision-making are there and who exactly can co-determine where. We are interested in the general co-determination around questions of company pension schemes, but especially the co-determination in questions about investment decisions.
4. The findings from the first three work packages are concretized. This is where the analysis of the practical implementation takes place. The aim is to investigate what influence actors of co-determination have on investment decisions in selected systems of capital-based company pension schemes and what standards or certification of sustainability are used. The aim is to determine the extent to which the trade unions' social, ecological and corporate governance goals are pursued in the relevant company pension schemes. Two case studies will be carried out in the Netherlands and Denmark and three in Germany. This procedure also allows us to go into the intermediate stages of the investment chain and to check whether the investments at the end correspond to the goals intended and the investment preferences formulated at the beginning of the investment chain.