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APG Responsible Investment Report 2019 42. |
The portfolio managers actively follow relevant regulatory, G technological and market developments. |
APG has not invested in new coal-fired power stations in its G infrastructure portfolio for over ten years and will not be doing so in the future. We are asking coal companies in other portfolios to stop expanding coal plants and to develop a strategy to switch to sustainable energy. |
In calculation models, we price financial risks, such as carbon G prices and declining coal revenues. For example, our investors closely monitor the cost of battery technology and the relative cost of energy sources (the so-called Levelized Cost of. |
Electricity). |
APG actively engages in dialogue with companies to reduce G their carbon emissions. One of the ways we do this is within the Climate Action 100+ partnership. |
portfolio. We looked ahead to 2022, 2030 and 2040. |
The resulting picture is that the effects of climate change will be huge and all-encompassing by 2040. Leading up to 2040, the transition is gradual for a global and diversified portfolio such as that of APG. However, the transition may be accompanied by disruptive changes and unexpected tipping points, which we must k... |
We are already seeing major transitions in the 2-degree scenario before 2030, with associated risks and opportunities, particularly in the following sectors: power plants, real estate, cement industry, oil and gas, aircraft industry, food and consumer goods, automotive industry, semiconductors and electrical goods, agr... |
Sectors that are particularly vulnerable to the physical impacts of climate change, but that also have opportunities are: agriculture, forestry, real estate, water plants, oil and gas, food processing, road and rail transport, mining, power plants, healthcare and construction. |
In addition to mapping sector effects, we also took climate factors into account in the macro-economic models we use for our strategic investment plan. Using two scenarios (“climate pit” and “good globalization”), we mapped out the possible consequences for growth, inflation and other economic variables. |
A follow-up analysis also identified the climate risks for government bonds. |
[19] This shows that the exposure to countries with a high climate risk (physical and transition risks) is very limited and corresponds to the benchmark exposure. |
In addition, APG took steps in 2019 to gain a better insight into the physical and transition risks of climate change when investing in real estate. Based on information from multiple data providers, we are developing a database of the physical climate risks of our global real estate investments. In 2019, in collaborat... |
3. What processes do we use to identify, assess and manage risks associated with climate change? |
The results of our climate scenario analysis are documented in a stoplight model, giving us insight into the main climate opportunities and risks in 2022, 2030 and 2040. We repeat this analysis every two years to incorporate the latest developments and insights into the scenarios. |
The portfolio managers and sector specialists of the various investment categories are primarily responsible for managing climate-related risks and seizing opportunities, as this is where the specific knowledge is on how climate change may affect investments. As part of their investment analysis and risk management, th... |
Here are a few examples of how our investors analyze and manage risks and opportunities: |
With the climate scenario analysis, we have taken steps to further integrate climate change into the so-called second-line risk management function. The stoplight model and dashboard with indicators are available for management teams and the risk management department. This second-line function will be further develope... |
[19] Approximately 1% of the countries could not be classified by portfolio value. The analysis of government bonds gives a low-medium-high risk per country. This analysis is based on datasets and methodology of ND-GAIN (physical) and HSBC (transition). |
APG Responsible Investment Report 2019 43. |
We follow a set of 20 indicators to gain insight into the speed G of the transition. For example: demand for oil and gas, investments in renewable energy, and number of electric cars. |
We measure the carbon footprint of the equity and real estate G portfolios. For the listed equity portfolio, our pension fund clients have set targets for carbon reduction. |
We measure how much we invest in renewable energy. Our G biggest pension fund client, ABP, has a target for investments in renewable energy. |
We measure what sources our energy-related investments use G to generate energy (coal, oil, gas, nuclear and renewable). |
We measure how much we invest in companies that G contribute to the Sustainable Development Investments (SDIs). Two of our pension fund clients have targets for investments in SDIs. |
4. What indicators and targets do we use to assess and manage climate-related risks and opportunities? |
APG Responsible Investment Report 2019 44. |
ANET ABP Netherlands Energy Transition fund; fund set up in 2018, specifically for investments in relatively small projects and companies focusing on innovative solutions to the climate problem. |
AODP Asset Owner Disclosure Project; organization that determines how large asset owners identify the impact of climate change. |
APG AM APG Asset Management; APG's asset management company. |
CHRB Corporate Human Rights Benchmark; benchmark established in 2017, comparing approximately 100 companies on their human rights policies. |
CRREM Carbon Risk Real Estate Monitor. |
ESG Environmental, Social and Governance; issues taken into account in responsible investing. |
ETF Exchange traded fund; basket of investments traded on the stock exchange, like shares. |
GISD Global Investors for Sustainable Development. |
GRESB Global Real Estate Sustainability Benchmark; organization set up by APG, in collaboration with other parties, which compares the sustainability performance of real estate funds. |
GRIG Global Responsible Investment and Governance Team; APG experts on sustainability and good corporate governance. |
IMVB Internationaal Maatschappelijk Verantwoord Beleggen - International Socially Responsible Investment. |
OECD Organization for Economic Cooperation and Development. |
PRI Principles for Responsible Investing; worldwide association of some 2,300 pension funds, asset managers and companies that seek to promote responsible investing. |
SDG Sustainable Development Goal; development goal set by the United Nations to make the world a more sustainable place by 2030. |
SDI Sustainable Development Investment; an investment that is attractive from a financial perspective and contributes to achieving the Sustainable Development Goals. |
TCFD Task Force on Climate-related Financial Disclosures; working group led by Michael Bloomberg, who published a report in 2017 on how companies and funds, among others, can best report on climate change. |
UNGC United Nations Global Compact; a United Nations initiative to encourage businesses to adopt sustainable and responsible business practices. |
VBDO Vereniging van Beleggers voor Duurzame Ontwikkeling – Dutch Association of Investors for Sustainable Development. |
Appendix 2: Abbreviations |
Responsibility 2018. |
The ATP Group |
CONTENTS. |
Introduction 4 Responsibility in the ATP Group 4 About this report 4 ATP as a responsible investor. |
Themes 12 ATP and the UN’s Sustainable Development Goals 12 A diversified portfolio requires broad coverage of ESG issues 17 Climate 17 ATP’s climate efforts 20 ATP increases investments in green bonds 21 Climate-related metrics – carbon footprint at portfolio level 24 Calculations of portfolio carbon footprint 26 Clim... |
Responsibility in unlisted investments 35 Tax 35 Predominantly positive experience with the implementation of ATP’s tax policy 35 Ongoing challenges 36 Learnings from the year’s practices prompted revision of ATP’s tax policy by the Supervisory Board 38 ESG integration in alternative investments 38 Standardisation and ... |
Active ownership and fact-finding 45 Active ownership – Continuous dialogue and voting 46 Continuous dialogue 47 Dialogue through general meetings 47 All ATP’s voting decisions are made in-house 48 ATP considers each individual proposal 48 ATP’s voting policy is global and principles-based 50 ATP sends voting intention... |
Resource consumption and diversity in the ATP Group 70 Resource consumption and diversity. |
Appendices 76 Appendix 1-5 |
4. |
Responsibility 2018. |
RESPONSIBILITY IN THE ATP GROUP. |
ATP plays a significant role in society as a pension fund with more than 5 million members in Denmark and as the authority responsible for disbursing a number of welfare benefits. ATP also manages one of the largest pension asset holdings in Europe, which imposes on us a special obligation to invest responsibly and ful... |
ATP is established by statute, and its aim is to provide good, stable pensions and basic financial security for its members by investing its pension assets sensibly and responsibly. |
The preconditions for high future returns are long-term and sustainable business value creation. Therefore, it is also important to us that the companies ATP invests in establish long-term goals and take responsibility for the societies they operate in. By acting responsibly the businesses maintain their legitimacy and... |
ATP’s 5 million members, Danish and international NGOs and other stakeholders have – often diverging – expectations with regard to how ATP should exercise responsibility. At the same time, institutional investors are faced with constant dilemmas in terms of responsibility in investments, including in their assessments ... |
As an important social institution, ATP also participates in the public debate, contributing facts, analyses and views on topics such as pension policy, rule simplification, responsible investment and tax, for example by making ourselves available to the media, NGOs and legislators. |
ABOUT THIS REPORT. |
This report deals with ATP’s work on responsibility. The report focuses on responsibility in investments, as they have the greatest impact on society. |
However, all parts of the Group leave a footprint on society, which is why ATP also reports on fase+, employee satisfaction, carbon emissions and water use at the ATP Group’s own offices on page 70. |
The report is ATP’s statutory report on responsibility and covers the period 1 January 2018 to 31 December 2018. The report also constitutes ATP’s Communication on Progress to the UN Global Compact, describing ATP’s progress in terms of incorporating the ten principles of the Global Compact into processes and business ... |
ATP complies with the Stewardship Code of the Committee on Corporate Governance. The report can be found at https://www.atp.dk/en/results-and-reports/ annual-and-interim-reports. |
ATP AS A RESPONSIBLE INVESTOR. |
Long-term and sustainable value creation is crucial to our work on responsible investments, and ATP works hard to integrate responsibility into its investments within the framework of the Supervisory Board’s three policies on responsibility in investments, active ownership activities and tax on illiquid investments. Th... |
Introduction |
5. |
Responsibility 2018 on responsibility in investments is business-driven and based on stringent criteria. |
ATP considers analysis of companies’ and countries’ ESG issues to be an important and relevant element in ATP’s risk management work, and ATP’s experience is that investment opportunities can also be identified on the basis of this work. Experience has shown that we make better investment decisions by integrating ESG i... |
By entering into a constructive and patient dialogue with portfolio companies, ATP is able to gain an understanding of the challenges facing the companies, which, in turn, can be used to make better and more informed investment decisions. Dialogue and active capital ownership activities also allow us to encourage the c... |
To ensure management ownership of responsibility in ATP’s investment decisions, the responsibility efforts are coordinated by a dedicated Committee for Responsibility. The Committee is chaired by the ATP CEO and other members are the CIO (Chief Investment Officer) and the CRO (Chief Risk Officer) as well as relevant ma... |
ATP’s Policy of Responsibility in Investments ATP’s Policy of Responsibility in Investments constitutes the overall framework for the work on responsibility across asset classes and investment methods. |
The aim of the policy is to ensure that ATP also includes considerations for the environment, climate, human rights, labour and management issues in its risk management and investment processes in line with other business conditions and risks. |
In ATP’s Policy of Responsibility in Investments, ATP’s Supervisory Board sets out a number of basic principles and minimum criteria for the portfolio companies’ conduct. Among other things, the policy states that ATP does not invest in companies that deliberately and repeatedly violate the rules and regulations of the... |
ESG strategy ensures continuous development of processes In 2017, ATP’s Policy on Responsibility in Investments was updated by the Supervisory Board to cover all asset classes. In order to manage the work on developing and expanding strong ESG processes for all asset classes, each year the Supervisory Board sets out an... |
ATP’s ESG strategy is rooted in four fundamental and overall principles: 1. ESG as an investment belief. |
ATP considers analysis of companies’ and countries’ ESG issues to be an important and relevant element in ATP’s risk management work, and ATP’s experience is that invest- |
Supervisory Board. |
Committee for Responsibility Team ESG. |
Portfolio managers. |
Governance and responsibility |
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