Challenges of ESG Integration in a Large Pension Fund Portfolio
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Transcript of Challenges of ESG Integration in a Large Pension Fund Portfolio
Challenges of ESG Integration in a Large Pension Fund PortfolioRob LakeHead of Sustainability
TBLI Asia, Bangkok29 May 2008
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Introduction to APG
• Established on 1 March 2008: APG, All Pensions Group• One of the largest independent pension administrators in the
Netherlands and one of the largest managers of pension assets in the world
• APG Investments manages more than $330 billion• Represents the pension interests of 2.7 million Dutch individuals and
4000 employers• Investments 80% internally managed• 450 investment staff
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€
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€
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€Risk-adjusted return
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€Risk-adjusted return Social responsibility
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€Risk-adjusted return Social responsibility
Pension scheme
members care
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€Risk-adjusted return Social responsibility
Assets in our business
Pension scheme
members care
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Purpose of Responsible Investment Policy
• to improve APG’s risk-adjusted financial return
• to protect our reputation by demonstrating social responsibility
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Responsible Investment Policy
• Integrate ESG as widely as possible across the portfolio• Compliance with UN Global Compact• Active corporate governance and voting• Invest in sustainability solutions• Engage with policy-makers• Exclude certain weapons
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Integration into investment processes
What it is/does
• Broader and deeper analysis of key trends and issues
• Better understanding of risk and opportunity
• Identify new themes• Build stakeholder trust
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Integration into investment processes
What it is/does
• Broader and deeper analysis of key trends and issues
• Better understanding of risk and opportunity
• Identify new themes• Build stakeholder trust
What it is not/does not do
• ‘Deepest green only’• Large-scale exclusion• Campaigning
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Equity strategies
• Fundamental – bottom-up research, key issues, dialogue with companies, no mechanistic link to valuation
• Thematic – issues and trends• Quant – under development: ratings etc
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Investor and corporate responsibility
• Seek to ensure companies operate in accordance with legitimate international standards – UN Global Compact
• Screen whole portfolio• Dialogue with companies that fall short of these
standards• Divestment is final option – if company does not improve
and risk to us as an investor is unacceptable
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Alternatives
• Timberland must be certified to FSC or, in the US, SFI• Infrastructure – dialogue with managers on environmental
and social impacts – e.g. Equator Principles• Agricultural land – social issues in southern Africa,
environmental in Eastern Europe• PE – developing dialogue through arm’s length PE
partner AlpInvest – look at selection and monitoring of GPs
• Real estate – developing dialogue with fund managers
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Invest in sustainability solutions
• Carbon funds – €500 million* projected CO2 reduction of 75-80 m tonnes 2008- 2013
• Clean technology private equity - €250 million• Renewable energy infrastructure – €100 million• Sustainable forestry in Mozambique - €60 million• Microcredit - $50 million
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Conclusions
• ESG is core business
• Risk-adjusted return
• Licence to operate
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