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36 36 36 38 39 39 39 39 39 40 41 7.5 Diverse executive boards can make better decisions 7.6 Reliability of greenhouse gas emission data 7.7 Prevention of money laundering at banks 8 Looking ahead to 2020 and beyond 8.1 New ABP policy 8.2 Policy development at bpfBOUW and SPW 8.3 Implementation of IMVB covenant 8.4 SDI ... |
Appendices Appendix 1: Addressing climate risks and opportunities Appendix 2: Abbreviations 44. |
The original report was drafted in Dutch. This document is an English translation of the original. In the case of any discrepancies between the English and the Dutch text, the latter will prevail. |
Chapter 1 Our approach |
Take our corporate social responsibility. G. |
Contribute to a good return for the participants of our pension G funds, taking risk into account. |
Promote transparency and proper functioning of the financial G markets. |
ABP bpfBOUW SPW. |
Carbon footprint of equities -25% -25% -25% |
Investments in sustainable development € 58 billion € 12 billion. |
Investments in renewable energy € 5 billion. |
Investments in education and communication technology € 1 billion. |
APG invests the future income of millions of people in the Netherlands, such as civil servants, teachers, builders, employees of housing corporations and our own employees. We want to make a difference and contribute to a sustainable future for the current and future generations. That is why, for every investment decis... |
1.1 Responsible investment and our mission. |
Our objective to contribute to an enjoyable, livable world can be found in our mission statement: ’Building your sustainable future together’. Based on collectivity and solidarity, we build a sustainable future together for pension funds, participants, employers, our own employees and society as a whole. |
APG aims for a return that fits in with a company that is socially involved and financially stable, in the interest of the pension fund clients and their participants. Our position regarding banks, pension insurers, asset managers and newcomers to pension land is clear: we are always on the side of the participants, wh... |
1.2 Concrete goals. |
APG has three goals with respect to sustainable and responsible investment: |
Our pension fund clients have concrete, measurable objectives for 2020 with respect to sustainable and responsible investments that contribute to a livable world for current and future generations. [1] 1.3 Responsible investment choices. |
In 2015, we started to fully integrate sustainable and responsible investing into our investment decisions. For each investment, we look at not only the expected return, risk and costs, but also at how sustainable and responsible the investment is. We call this the inclusion policy. In 2020, we want to invest only in c... |
New mandates and proposals for new investments (above a certain size) in unlisted companies and projects (such as real estate, infrastructure and private equity) are evaluated not only by portfolio managers, but also by specialists in sustainability and good governance. They have advisory powers and are involved in set... |
[1] For ABP, the policy cycle ended on December 31, 2019. At the beginning of 2020, ABP announced new objectives for the period 2020-2025. For the other pension fund clients, the policy cycle ends at the end of 2020. |
APG Responsible Investment Report 2019 10 |
our investments in companies and projects that contribute to G the Sustainable Development Goals (SDIs) and the preparations for an SDI Asset Owner Platform, in collaboration with others (Chapter 4); our thematic improvement trajectories (engagements) related G to child labor, safe working conditions and other themes (... |
collaboration with portfolio managers for responsible G investment; engagement with companies to encourage them to improve G with respect to corporate social responsibility; implementation of voting policy; G evaluation of proposals about sustainability and good G governance for unlisted investments; engagement with re... |
We are convinced that companies that pay enough attention to human rights, the environment and good governance perform better in the long run, not only with respect to sustainability, but also with respect to financial returns. Because long term fits in well with our position as a pension investor, we are in an excelle... |
1.4 Compliance with national and international regulation. |
The way we invest responsibly complies with national and international legislation and regulation. The OECD guidelines for multinational companies are the basis of the inclusion policy (Chapter 2). We also expect the companies we invest in to follow the principles of the UN Global Compact in terms of human and labor ri... |
Responsible Investment (Chapter 5). |
1.5 Progress in the implementation. |
In 2019, we completed the evaluation of over 10,000 companies that APG can invest in through shares or bonds. But new companies were also added to the investment universe, which received a provisional (pro forma) qualification. Based on this assessment, we decide what companies to invest in, with which companies we wan... |
There has also been progress in: 1.6 Embedding in the organization. |
APG has a team of eighteen specialists in sustainability and corporate governance at the offices in Amsterdam, New York and Hong Kong. The tasks of the Global Responsible Investment & Governance Team (GRIG) include the following: |
The intensive cooperation between the various parts of the company has contributed to a substantial increase of focus on and knowledge of sustainable and responsible investing within. |
APG. This expansion of knowledge within APG is in line with our aim to take a leadership role in sustainable and responsible investing. Other parts of APG, such as Fiduciary Management and Risk Management, also have sustainability and responsible investment specialists. |
The availability of reliable sustainability information is crucial for the proper execution of the policy. We therefore ask companies to publish more and better sustainability information. We also do all we can to gather information ourselves. For example, we are working on a standard that will give investors insight i... |
Development Goals (Chapter 4). |
1.7 Our pension funds top sustainability ranking. |
Our pension fund clients again scored high in the annual ranking of sustainable pension funds of the Dutch Association of Investors for Sustainable Development (VBDO). Just like last year, ABP, our biggest client, took first place. The fund scored 4.6 out of 5 points. BpfBOUW moved from third to second place. SPW is no... |
VBDO investigates every year how responsibly the 50 biggest pension funds in the Netherlands are investing. The pension sector as a whole scored slightly lower this year, because VBDO raised the bar. |
APG Responsible Investment Report 2019 11 |
"Research into effect on risk and returns strengthens our confidence in our approach" |
Interview with Gabriëlle Krapels, Manager Mandate Research at APG. |
With the growing interest in responsible investing, the question arises: is investing with concern for human rights, the environment and good corporate governance also favorable for the risk and return of the investments? After all, our goal has always been and still is to provide participants with a good pension. The ... |
Responsible investments and returns; what does science say? “We got professor Kees Koedijk from the University of Tilburg to map out the current scientific insights into this subject. It was a big job, because there is a lot of academic research into the connection between responsible investments and financial performa... |
What does this mean in practice for the way APG invests? “The scientific research strengthens us in the conviction that we make better investment decisions when we pay structural attention to sustainability and responsible investment. By paying close attention to this, we get a better picture of the opportunities and r... |
APG uses its influence to convince companies to make improvements. Does this also lead to better investments? “An essential part of our approach is that we evaluate any companies we can invest in on their concern for human rights, the environment and good corporate governance, and we have discussions with companies tha... |
Did APG also study the effect on risk and return in its own investment portfolio? “We are working on a method to monitor and measure the effect of responsible investing on our portfolio on a continuous basis. Where possible, we have mapped out the effect of responsible investment on risk and return since 2015. There ar... |
APG Responsible Investment Report 2019 12 |
APG Responsible Investment Report 2019 13 2 Active investment in leaders and laggards |
APG Responsible Investment Report 2019 14. |
Criterion Examples. |
Business ethics Bribery & corruption, money laundering, inappropriate promotions of medicine, lack of whistleblower schemes. |
Labor rights Health and safety at work, working conditions. |
Human rights Relationships with local communities, data privacy & safety. |
The environment Emission of greenhouse gases, standards for waste and water use, expansion of coal capacity. |
As a responsible investor with a long-term view, we are convinced that we can have the greatest impact not by ‘excluding’ investments, but by ‘including investments’. What do we mean by that? 2.1 What is inclusion? |
Inclusion means that we evaluate any companies that we can invest in through shares or bonds (the investment universe) according to return, risk, cost and the degree to which they operate sustainably and responsibly. If a company meets our criteria and it scores above average in the industry in question [2], we call th... |
In addition, there are companies that score high in terms of return, risk and cost, but lag behind in terms of sustainability and governance. We may invest in such ‘laggards’, but only if we expect we can inspire them to improve. We then call the company a ‘potential improver’. |
With the inclusion policy, we comply with the guidelines of the. |
OECD (Organization for Economic Cooperation and. |
Development) for systematically identifying ESG risks in the portfolio and influencing companies to scale back those risks. |
2.2 The investment universe classified. |
In 2019, we completed the evaluation of all 10,000+ companies that we could invest in through shares or bonds. |
These are now classified as either leaders or laggards. The portfolio managers also determined with which laggards they want to engage. At the end of 2019, there were 240 of such ’potential improvers’ in our investment portfolio. [3] |
Our clients only want to invest in leaders and potential improvers from 2020 on. To make this possible for them, we are investing in digital technologies, artificial intelligence and other ways to collect data about the sustainability performance of an investment. However, a human touch is still required. The quality o... |
2.3 Leader or laggard? Our criteria. |
The criteria we have developed to evaluate companies are based on the principles of the UN Global Compact in terms of human rights, labor rights, the environment and business ethics. We check if companies have a good policy in these areas. We also check if they generally honor agreements or if any incidents are known. ... |
2.4 Differences between regions and sectors. |
We use separate criteria for every industry. They take into account the specific risks that exist in that sector. We also look at the countries and regions where the companies are active. |
We expect companies that are active in areas with an increased risk of human rights violations to be able to detect those risks and limit them. This means that they must at least have an appropriate human rights policy. |
[2] More: precisely: if the normalized score is above the median. [3] An overview of companies we have engaged, and the themes, can be found on: apg.nl |
APG Responsible Investment Report 2019 15. |
Inclusion: what do we look at? Three examples. |
Mining companies. |
We check if the mining companies have a good policy for managing risks such as bribery & corruption and risks related to health and safety, human rights and the environment. We also check if the company has been involved in any incidents, such as environmental contamination, corruption or violation of human rights. |
Pharmaceutical companies. |
Pharmaceutical companies are subject to risks related to product quality and safety, aggressive marketing and bribery & corruption. For example, giving inappropriate remunerations to physicians for prescribing certain medications. We assess whether the companies we invest in have a policy and procedures to manage these... |
Utilities. |
Utilities often have intensive contact with the governments of the countries in which they are active, due to the permits that are required. This creates the risk of their getting involved in bribery and corruption. In addition, we do not want utilities to put any new coal-fired power plants into operation. If they do ... |
2.5 Inclusion remains a work in progress. |
Inclusion is never ‘done’. Companies change and new ones emerge. Just in 2019, over 2,000 new companies joined our investment universe. These also had to be evaluated. During the year, they received a provisional (pro forma) classification as leader or laggard. In January 2020, these classifications were officially set... |
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