Amidst rising geopolitical tensions, the role of occupational pension funds in investing in security and defense has come under political attention. Given their longstanding commitments to sustainability and incorporating social and environmental considerations into investment practice, this raises questions for how European pension funds will navigate political demands and tensions arising between security and sustainability commitments. Adopting a comparative, multi-level approach, this paper examines how regulation and policy shape pension funds’ commitments to security investments in the Netherlands, Denmark, and the UK in interaction with existing sustainability commitments. We analyse regulations at the EU and national level to understand the formal rules shaping pension security investment; formal and informal policy at the national level; and commitments and security investments at the individual pension fund level.
The analysis finds that across the three countries, there is both significant political pressure to increase security investment from pension funds and limited regulatory limits on security investments. However, there has been significant difference in pension response to these pressures. Only in Denmark do we identify new commitments to security investments. In the Netherlands and the UK, pension funds support the political goal of increased defense spending, yet also signal the need for intervention to improve the investibility of defense. Across most of the pension funds studied, we see little evidence that pension funds consider security investing to be in contradiction with sustainability or ethical investment goals. Portfolio analysis reveals that most of the pension funds studied invest in top weapons producers. Sustainability-security tensions more often emerged in unexpected and less visible ways, such as ‘crowding out’ effects of established investment priorities, existing use of exclusion policies for other sectors or investment standards for company transparency or disclosure.