I am thrilled to announce that the Hans-Böckler-Stiftung has decided to fund our research project “Sustainability through company pension schemes? The influence of codetermination actors on investment strategies.” The funding will allow Karen Anderson, Tobias Wiss, myself and two postdoc to study this important topic for the next two years. Read more about the project below.
Sustainability through occupational pension schemes? The influence of codetermination actors on investment strategies
How can codetermination actors influence sustainable investments in occupational 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. However, there is a lack of studies that investigate to what extent actors of co-determination influence investment decisions and use them for non-financial purposes. Investing in sustainable activities – i.e. taking ecological, social and corporate governance aspects into account – can be a means of realizing the union goal of a sustainable and just society. It is also important to clarify which standards of social-ecological investments exist and who regulates them and how.
The planned project therefore analyzes a) what influence actors of co-determination have on investments in occupational pension schemes, b) to what extent they take into account socio-ecological aspects and c) whether the preferences expressed at the beginning of the investment chain match the final investment. Answers to this are particularly relevant for Germany in view of the increasing importance of occupational pension schemes. The comparison with the Netherlands and Denmark – both countries with quasi-universal occupational pensions, strong trade union influence and substantial sustainable investments – provides important insights and recommendations for political actors in Germany.
Together with Jeanne Lazarus and Daniel Mertens, I am organizing a mini-conference on The Welfare State in Financial Times for the 2020 SASE conference in Amsterdam (July 18-20). Paper abstracts can be submitted from November 25, 2019 until January 10, 2020.
In this mini-conference, we hope to explore the complicated new ways in which social and financial policies have become entangled in contemporary welfare states. Particularly, we are interested in the question of how processes of financialization are shaping welfare state development. On the one hand, the contributions to the mini-conference would map the ongoing financialization of the welfare state in contemporary political economies, both historically and comparatively, by focusing on the introduction and expansion of financial tools and mechanisms in public and private welfare provision. On the other hand, we welcome contributions that study how welfare states and other social groupings have debated and introduced new public policies and financial tools that promise to protect against growing financial risks in everyday life. Looking at these promises of protections through the market requires a fundamentally different understanding of the nature of the welfare state than the scholarship’s traditional focus on decommodification.
This mini-conference has several aims. First, we hope to reintegrate scholarship on welfare and finance to come to a better understanding of how the welfare state and the financial system are mutually intertwined, both historically and comparatively. Second, we hope to approach the mini-conference theme using a broader conception of finance: to include not just financial actors and their interest organizations, but also financial ideas and narratives, norms and practices that interact at different scales of the modern polity. Third, we would like to reflect on how the use of financial tools can be considered as a tool to protect household living standards and economic stability. Finally, we hope our mini-conference forms the basis of new conceptualization of welfare state development under financialized capitalism.
We welcome papers with varied disciplinary backgrounds discussing the following issues:
Variations of finance-welfare interactions across political economies and over time;
Lineages and linkages of institutional/ideational change in social policy areas and financial systems;
State experiments with financial and technological innovations to fund and manage welfare programs;
Political coalitions undergirding or confronting the welfare-finance nexus;
The distributional and political effects of financial market-based social policies, particularly on class, gender, and race;
The relationship between financialization and contemporary paradigms of social policy analysis such as marketization, privatization and social investment;
Histories and narratives on the mutually constitutive nature of the financial system and the welfare state;
Conceptual and methodological discussions that offer new research strategies to study financialization within the welfare state.
More details can be found on the SASE website (scroll all the way down for our mini-conference).
On January 25, Tobias Wiß (Johannes Kepler University Linz) and I will be presenting our paper “Pension Funds and Sustainable Investment: Comparing Regulation in Denmark, Germany and the Netherlands” (with Karen Anderson, University College Dublin) during the Netspar International Pension Workshop in Leiden.
Our paper reports the first findings of a Netspar-funded research project on the regulation of sustainable investment by funded pension schemes. In this study, we use insights from comparative political economy and financialization studies to direct attention to the institutional underpinnings of pension schemes’ investment behaviour. The starting point of the paper is the assumption that regulation either incentivizes or discourages sustainable by pension funds. We furthermore assume that the type of regulation present in a pension system is influenced by institutional characteristics, such as the history of the pension system, the capitalization of the second pillar, the vehicles for pension provision, and the mode of governance. The paper employs a broad conceptualization of regulation, incorporating 1) national legislation, 2) regulatory activities by supervisory agencies and 3) self-regulation by the pension sector itself.
In all three countries, there is a growing sense that sustainability is related to (positive) return and that pension schemes, as other groups of politics, the society and the economy, need to take on responsibility for future sustainability, especially in times of climate change. Nonetheless, we do find substantial differences with regard to the regulation of sustainable investment by pension funds: highly developed in the Netherlands, moderately developed in Denmark and underdeveloped in Germany. In none of the cases, legal requirements for sustainable investment exist. Pension investments in all three cases are guided by the prudent person rule, although other rules may exist (e.g. ban on cluster munition in the Netherlands, quantitative restrictions in Germany). The Netherlands stands out as the only case, where 1) the industry has initiated self-regulation on sustainable investment and 2) where the regulator is developing a more all-encompassing attitude towards financial risk, that for instance also includes climate risk. Finally, we find that fund-level activities toward ESG investments are considerable in the Netherlands and Denmark and rather moderate in Germany.
In the coming months, we’ll be revising our paper before it will be published as a Netspar working paper. Keep on an eye on this website or our project page on ResearchGate for any updates.
My article “Financialisation and the Pension System: Lessons from the United States and the Netherlands” was recently published in the Journal of Modern European History (Vol. 15, No. 4). The article explores the financialisation of private pensions in the United States and the Netherlands. It proposes two distinct arguments. First, the article shows that both the American and the Dutch pension systems stand out internationally for their high degrees of capitalisation and the absence of substantive investment restrictions for pension funds. The article posits that both pension systems are highly financialised, yet the process of financialisation has proceeded along different historical paths and within different institutional contexts.
Second, the article maintains that the financialisation of pension systems is accompanied by its own political dynamics. In both political economies, different groups of actors (employers, labour unions, financial professionals) have made claims over the growing concentration of pension assets. Here, particular emphasis is given to the role of the state. It shows how since the mid-1970s, both American and Dutch pension funds have altered their investment strategies, abandoning public debt as the dominant investment category.
The article explains this change in terms of the rising popularity of modern portfolio theory and the immense growth of pension capital in need of new investment options. As austerity politics have made governments more dependent on financial markets, pension funds have become more assertive in leveraging their assets and demandingpolitical reform which are in the interest of the financial industries. Financialisation has thus fundamentally altered the balance of power between the state and financial market actors.