Do pension funds have to choose between financial returns and societal impact? According to Professor Stefan Thewissen, this is a false dilemma. In his inaugural lecture on 22 May, he argues that the two do not have to be mutually exclusive. He calls on the sector to invest in societal impact, returns, and the quality of decision-making in a legitimate and professional way.
Pension funds manage our savings for the future. In doing so, they determine not only how much pension will ultimately be available, but also influence the kind of economy and society in which that pension will be paid out. “That is precisely where tensions arise,” Thewissen explains. “Return remains a core objective, but it cannot be separated from broader questions about stability, livability, and long-term risks. Societal expectations and European legislation on sustainable investing and transparency are increasing this tension.” In his lecture, Thewissen explores how pension funds can pursue societal objectives alongside financial returns by focusing on legitimacy, sound professional decision-making, and sustainable investment opportunities.
Legitimacy as a crucial condition
The issue of legitimacy for pension funds concerns the extent to which they are socially and democratically authorized to make decisions on behalf of their participants. This issue is particularly relevant because pension funds are often governed by unelected boards, while participants are typically required to join through their employer and have limited ability to switch to another fund. “It is therefore important that pension funds anchor their policies and investment strategies in broadly supported societal goals and in the preferences and values of their participants.”
Listening before investing
Research shows that pension fund participants value societal goals—even if this might come at the expense of returns. “People want to be able to enjoy their pension in a livable world. This means pension funds must take into account the societal effects of their decisions.” Thewissen explains that building support also requires actively engaging with participants and providing them with information. “This is often done through surveys, but these tend to be quite abstract. An innovative example is Pension Fund Detailhandel, which organized a three-day ‘participant dialogue’ in which participants, after intensive discussions and expert presentations, made recommendations to the board. This actually led to changes in policy.”
Accountability means looking ahead
In addition to legitimacy, accountability is essential: pension funds must be able to professionally substantiate why certain goals are chosen and how those choices serve participants’ interests. “This requires carefully reasoned decision-making, transparency, and policies based on evidence, a long-term perspective, and expert judgment—rather than political whims or short-term thinking.” Thewissen notes that pension funds are actively seeking investments that combine return, risk management, and societal value. A striking example is the Dutch pension fund for healthcare and welfare (PFZW), which has long invested in reinsurance against natural disaster damage, such as hurricanes. In doing so, the fund partly assumes risks from insurers. For PFZW, this provides diversification and solid returns, while also helping people access affordable insurance as extreme weather events become more frequent due to climate change.
Staying the course
Thewissen concludes with a call to action: “Take this responsibility, but do so in a professional and legitimate way.” At the same time, he believes pension funds can create more clarity and stability for themselves by grounding their choices more firmly in widely supported societal goals that matter to their participants. “That helps them stay the course.”