Experts versus representatives? Financialised valuation and institutional change in financial governance

Golka, Philipp; Zwan, Natascha van der

doi:10.1080/13563467.2022.2045927

Cited by 15 publications

(9 citation statements)

References 46 publications

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“…The US pensions demonstrate a relatively earlier involvement in shareholder engagement on climate issues, likely due to the corporate governance movement originating in the US (of which pension funds like CalPERS were key actors), as well as the presence of US-based investor initiatives, such as Ceres (Cheffins, 2015 ; Lannoo, 1999 ). European pension funds allocated large portions of their portfolios to international equities later than US funds, likely affecting when they initiated broad shareholder activism programmes (Golka & van der Zwan, 2022 ; van der Zwan, 2017 ). However, there is general alignment in pension strategies from the second period identified in this paper, beginning around 2009.…”

Section: Discussionmentioning

confidence: 99%

Pension funds and fossil fuel phase-out: historical developments and limitations of pension climate strategies

McDonnell

2024

Int Environ Agreements

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Despite the decades of international climate negotiations and several landmark agreements, global efforts to date to restrict fossil fuel production in line with climate targets have been unsuccessful. As national and international policies continue to fall short of phasing out fossil fuels, increasing attention has been paid to non-state actors, like pension funds, as a potential source of more ambitious climate action. As major asset owners, large shareholders in fossil fuel companies, and historically activist investors, pension funds are theoretically well-placed to contribute to phasing out fossil fuels. Despite growing recognition of this potential role for pension funds and other major investors in climate change mitigation, there has been little attention to pension funds’ historical record on climate change, or to how their climate strategies have developed and changed over time. This paper examines how the climate strategies of the largest US and European pension funds have evolved in relation to key developments in international climate agreements and the extent to which these strategies contribute to restricting fossil fuel supply. Through an analysis of the annual, governance, and sustainability reports of 6 pension funds from 1997 to 2022, we examine the strategies pension funds have adopted to address both climate change and fossil fuels. Pension funds have demonstrated responsiveness to the signals of international climate agreements, adopting a range of strategies with respect to climate change (amongst others, integrating ESG principles, increasing their sustainable investments, and setting net zero goals). Their explicit attention to fossil fuels and contribution to supply-side interventions take the form of systematic shareholder engagement, (selective) divestment, and lobbying policymakers. While pension fund climate action is growing , the ambition of their strategies is not aligned with a rapid fossil fuel phaseout; their efforts are often focussed on improving disclosure and transparency and demonstrate complacency with minimal improvements from fossil fuel companies. If pension funds are to significantly contribute to phasing out fossil fuels, redefining pension fund responsibilities and the traditional shareholder role will likely be required.

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Section: Discussionmentioning

confidence: 99%

Pension funds and fossil fuel phase-out: historical developments and limitations of pension climate strategies

McDonnell

2024

Int Environ Agreements

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“…While these variations are informed by the funds’ organizational model, they cannot be reduced to it. As these internal dynamics are known to also affect politico-economic dynamics on the macro level such as financialization (Golka and Van der Zwan, 2022; Pernell et al, 2017), we call for more empirical political economy scholarship into the organizational practices of financial governance.…”

Section: Discussionmentioning

confidence: 99%

“…The hybrid forms of internal supervision have proven popular: as of 2021, more than half of Dutch pension funds had a supervisory council (41%) or one-tier board (12%), with 33% of pension funds having a committee of external evaluators (De Nederlandsche Bank, 2023). The choice between a supervisory council or committee of external evaluators is decided by the fund's governance model and size (for an overview of governance models, see Golka and Van der Zwan, 2022). A supervisory council is mandatory for most industry-wide funds with paritarian or independent boards.…”

Section: Internal Supervision In the Dutch Pension Systemmentioning

confidence: 99%

“…corporate or government bonds) to corporate equities and alternative assets such as real estate and private equity (Braun, 2022; McCarthy et al, 2016). The outsourcing of asset management and other investment-related tasks to financial intermediaries (Gelepithis, 2019) and the introduction of new valuation techniques (Golka and Van der Zwan, 2022) have also been associated with pension financialization.…”

Section: Internal Supervision As Financial Regulationmentioning

confidence: 99%

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Regulation from the inside? Internal supervision in Dutch pension funds

Zwan

Golka

2023

Competition & Change

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Political economists have long acknowledged the importance of funded pensions acting as catalysts for processes of financialization. The transformation from rule- to risk-based pension fund governance is particularly important for pension financialization. Risk-based governance involves monitoring of internal decision-making procedures by new professionals rather than compliance with highly detailed legal restrictions. Scholars of financial regulation have termed this kind of supervision ‘regulation from the inside’. Being part of the organization they monitor, internal regulators hold fundamentally ambivalent positions. Existing studies emphasize the duality of internal regulators’ role perceptions as well as their attempts to span the boundaries between themselves and other organizational actors. In this paper, we extend scholarly insights on risk-based supervision of private (non-)financial institutions to pension institutions by focusing on a peculiar form of ‘regulation from the inside’: so-called internal supervisors in Dutch occupational pension funds. Internal supervisors are pension fund functionaries, responsible for evaluating the governing board's performance and holding the board accountable. We report findings from an original survey and interview study among internal supervisors. Contrary to the formal requirement of independence between governing board and internal supervision (a ‘checks and balances’ perspective), we find that internal supervisors often adopt a ‘fusion of powers’ approach that emphasizes collaboration with the governing board. We attribute this finding not only to internal supervision’s institutional design but also to the highly networked character of Dutch pension governance.

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“…The same institutional feature might have been an important factor behind the latest reforms in the 2010s as well. Second, the historical legacy of partial pre‐funding, combined with the professionalization of pension investment (see also Gelepithis, 2019; Golka and van der Zwan, 2022), might have made it easier to increasingly utilize financial markets in public pension financing to generate better returns, which then made the enhancement or maintenance of collective DB pensions financially possible.…”

Section: Conclusion: Financial Markets Supporting Statutory Risk Sharingmentioning

confidence: 99%

Pension financialization and collective risk sharing in Canada and Finland

Liukko,

Doyle,

Lehtonen

2023

Int Social Security Review

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This article contributes to the debate concerning pension financialization and how countries are adapting their pension systems to respond to demographic ageing. We do so by examining the statutory pension systems of Canada and Finland, which diverge interestingly from current international trends. The Canadian and Finnish public pension schemes reflect two tendencies often associated with pension financialization: an increasing reliance on financial markets and an investment policy with a diversified asset allocation. However, unlike in many other countries, this has not resulted in heightened individual risks in old‐age income security caused by a shift from defined benefit to defined contribution pensions – an otherwise common trend internationally.

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Experts versus representatives? Financialised valuation and institutional change in financial governance

Cited by 15 publications

References 46 publications

Pension funds and fossil fuel phase-out: historical developments and limitations of pension climate strategies

Pension funds and fossil fuel phase-out: historical developments and limitations of pension climate strategies

Regulation from the inside? Internal supervision in Dutch pension funds

Pension financialization and collective risk sharing in Canada and Finland

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