Economy

Economy

By how much will interest rates continue to drop? What is the economic fallout of the coronavirus pandemic? What is our current view on globalization? And what are the consequences for the Netherlands of tomorrow? We will explore these issues here.

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APG advocates ‘just transition’ in the automotive industry

Published on: 16 November 2020

Corporate Human Rights benchmark includes sector for the first time

 

The shift to a low-carbon business model has taken center stage in the automobile sector, but the implications for workers and communities are often overlooked. That is one of the findings of the Corporate Human Rights Benchmark (CHRB) published today, of which APG is a co-founder. On behalf of our pension fund clients, we advocate a ‘just transition’ and urge car manufacturers to invest in employee resilience and prevent human rights risk in the supply chain.

According to the CHRB, automotive companies do not yet sufficiently demonstrate that they work with suppliers or set expectations to prevent human rights issues. This is particularly relevant given that the sector relies on supply chains with numerous areas of risks for human rights violations. It is the first time that the automotive sector is included in the benchmark.

Increased awareness

Anna Pot, Head of Responsible Investments Americas at APG Asset Management US, welcomes the inclusion of more companies and sectors in the CHRB. “The results suggest that the implementation of core human rights principles in still weak in the automotive sector. But experience shows that publication of the benchmark can have a positive effect on corporate awareness and overtime lead to improved human rights performance. The ICT sector, for instance, was added last year and now the average score of these companies has substantially improved.”

Although the automotive sector is newly added to the CHRB, the sector is not ‘new’ to APG in terms of human rights engagement. Pot: “On behalf of our clients, we have until the end of 2019 been engaging with thirteen large car producers to improve labor conditions and tackle child labor in cobalt mining. Cobalt is an indispensable raw material for batteries in electric vehicles. We have made progress. For instance, Renault initiated inspections of the cobalt smelters it does business with, and Daimler has created a program to support local communities.”

Insight in human rights performance

APG, on behalf of its pension fund clients, co-founded the CRHB in 2017 and actively takes part in the development of the benchmark. “We contribute to this since we, as stewards of capital, are keen to improve corporate human rights performance,” Pot explains. “The CHRB provides good-quality data about an increasing number of companies which we, as a responsible long-term investor, need to make investment decisions and engage with investees.”

The CHRB benchmarks the human rights performance of companies in the apparel, agriculture, extractives, ICT and automotive sectors. Companies are assessed on 100 indicators based on the United Nations Guiding Principles (UNGP), using publicly available data on issues such as labor conditions, workers’ safety and living wage. This year however, the full assessment was only made for the automotive sector; the other sectors were assessed on a smaller subset of indicators. 

‘Just transition’

The automotive companies included in the CHRB were also assessed by the Climate and Energy Benchmark. Interestingly, some car manufacturers that demonstrated action on climate issues – such as carbon reduction targets – disclosed little information on human rights (and vice versa). “This suggests that the sector considers climate and human rights issues separately, despite them being increasingly recognized as interconnected,” says Pot.

The emission-intensive automotive sector faces the challenge of shifting to a zero-carbon economy while upholding the principles of a ‘just transition’. Pot: “That is why we are engaging with car producers on the impact of this transition on the workforce and local communities. Automation, industry transformation and digitalization could result in the loss of thousands of car manufacturing jobs. We encourage producers to make their workforce part of the transition by offering training and development opportunities.”

With regard to the other sectors, the CHRB results show an overall improvement in the scores across indicators, especially on public commitments to protect human rights and grievance mechanisms. The lower areas of improvement relate to human rights due diligence. This is the process a business is expected to follow to identify, assesses and act on human rights risks. Pot: “A growing number of companies are getting better at the fundamentals, but there is still ample room for improvement.”

Volgende publicatie:
What the American elections (could) mean for our retirement

Trump or Biden?

Published on: 2 November 2020

 

What the American elections (could) mean for our retirement

 

Like a pebble in a pond, events on the other side of the world affect our economy. This is especially true for developments in the US, still the most powerful nation on earth. Will the next president also determine the coverage ratio of Dutch pensions?

 

The global economy is a cohesive whole in which changes in one country can have a major impact on another. Global stock markets often react to events in the US and to statements made by US politicians. “It is a very important country from many economic perspectives,” Rabobank’s chief economist Menno Middeldorp recently said on BNR News Radio. “America is one of the largest economies in the world. In addition, we have more of our investments and pension funds in America than in any other country.”

 

Eyes and ears

When something changes in the US - for example due to elections – then, as an investor, you can notice it, confirms Thijs Knaap, Senior Investment Strategist at APG Asset Management. “Even if you haven't invested one dollar in the US. Even if you buy a purely Dutch company, such as Philips or Aegon, you still have to deal with the fact that these companies are active all over the world, including - for a substantial part - in the US”.  As a global investor, APG is active in the US, of course. Rajiv Mallick, Head of Risk Management, US, says that APG-US manages $108.3 billion (September 2020) for APG and its Dutch clients. From New York, he says: “Our pension funds and their participants benefit from extensive local investment expertise”. He describes the office as the “eyes and ears” of APG in the US.

 

Shocks and trends

The Dutch financial interests in the US are substantial. However, creating a link between the election results and the consequences for our economy - and thus our pensions - is not that easy, according to Knaap.  “Between the elections and the Dutch pensioners there is quite a bit of static on the line. Although it sometimes seems as if politicians have power over the economy, their influence is actually limited. A lot depends on economic shocks and trends”. Nevertheless, presidential elections do have an effect. Knaap remembers that the (unexpected) victory of Donald Trump in 2016 led to a rise in US interest rates. Investors expected the government to borrow more and that this would lead to inflation. The first thing happened, the second did not. Because of this expectation, the US 10-year interest rate at the end of 2016 was more than half a percentage point higher than just before the elections. Because interest rates respond to each other globally, the funding ratio of Dutch pension funds also increased as a result. This enabled many funds to avoid a discount.”


Healthy growth

Given the interests at stake, investors are closely following the U.S. elections.  Mallick is too. “We are carefully monitoring potential policy changes in several sectors, including healthcare, energy, finance, education and taxation. After all, one president is not the same as the other. An example: when Trump won the previous elections, he reopened the coal mines that his predecessor Barack Obama had just closed for environmental reasons. Heavy industry benefited. Joe Biden, as a Democrat, could undo that.” What Knaap pays particular attention to is the influence of America on global growth, and on international relations. “Trump has reduced corporate regulation and lowered taxes. At least in the short term, this is good for growth and for the profits that are ultimately shared with investors. In the longer term, however, you may wonder if we don’t need the rules for preserving our environment just as much for healthy growth.”           

 

America first

If Trump gets to stay, it is very likely that he will continue to implement the protectionist measures based on his “America first” policy. This could have consequences for the turnover and shares of Dutch companies, whose access to the large American market would then be impeded. World trade would also suffer as a result. The stock exchanges virtually always react negatively to such impediments.

Knaap is seeing that America has played a much smaller role in many international contexts under Trump in recent years, while tensions with China have increased. This incapacitates institutions like the WTO (World Trade Organization). “For the upcoming elections it seems to be a choice between a continuation of this policy and a - partial - return to the old situation.”

 

Blue wave

More attention is being paid, however, to a “blue wave”: a victory for Biden, with a majority for the Democrats, the “blues”, in Congress. Investment Manager Simon Wiersma gives a prediction on the ING website that the Democratic support and stimulus packages could lead to a broad stock market trend of investors who want to anticipate economic recovery. “No matter who wins, the financial market will be affected by the elections either way.”

Research conducted by the U.S. Bank over the past 90 years shows that the stock market rises by an average of 6.5 percent in the year after a president is re-elected, while growth with a new president is only 5 percent. But the bank also concludes that equities do much better under a Democratic president than a Republican in the longer run.

 

2 Scenarios

Finally, we ask strategist Thijs Knaap to outline 2 scenarios: what are the financial prospects under 4 years of Democrats and under 4 years of Republicans?

 

Biden

It seems that the Democrats are looking for more international cooperation again. The inequality, which has continued to increase under Trump - although the trend has been going on for much longer - could possibly be reversed by Biden's plans for a higher minimum wage, among other things. Investors seem to think that this could boost spending in the U.S., and thus growth. Because the return on investments must ultimately always come from economic growth, that could be good for our participants.”  

 

Trump

The Republicans seem to be planning to build a different model than the one we entered the century with. That model is more bilateral (America trades with countries, not as part of coalitions) and transactional (“quid pro quo”); not based on rules. A consequence of that model, at least under Trump, is unpredictability of policy. In general, investors are not very keen on this, because it discourages investment”.

Volgende publicatie:
"Our ability to change is considerably larger than we thought"

"Our ability to change is considerably larger than we thought"

Published on: 12 June 2020

How do three top managers in Dutch business deal with the company- and personal challenges that the global corona crisis poses for themselves and the organization?

 

What insights has the crisis yielded so far, what does Activity Based Working mean for the organization and what will these managers take into account in the much-discussed 'new normal'?

 

These questions were at the heart of a virtual roundtable on leadership in crisis time with directors from different sectors. Board member Annette Mosman was one of them.

 

Read the full article (Dutch) in Management Scope.

 

Photography: ABN AMRO / Maartje Geels / APG

Volgende publicatie:
APG, NPS and Swiss Life acquire Portuguese toll road operator Brisa

APG, NPS and Swiss Life acquire Portuguese toll road operator Brisa

Published on: 28 April 2020

APG, the National Pension Service of Korea (NPS) and Swiss Life Asset Managers have entered into an agreement to acquire an 81.1% majority interests in Brisa, a leading European toll road platform. The sellers value the company at more than €3 billion.

Brisa holds a total of 21 motorways in Portugal with a total length of over 1,500 km. The network covers the fundamental axis of the Portuguese road system, with over 7.5 million customers driving on the roads per year.

 

Jan-Willem Ruisbroek, Head of Global Infrastructure Investment Strategy at APG: “This investment in Brisa, on behalf of our pension fund client ABP, matches our strategy to deliver stable, long term returns in prime infrastructure assets worldwide. The company benefits from a high quality and well diversified road network and is a key contribution of economic development to Portugal. We now look forward to working with José de Mello and our consortium partners to facilitate the continued delivery of high-quality service for motorists and commuters and continue innovating in the road and mobility services segment.”

APG makes this investment on behalf of its pension fund clients ABP and APG PPF.

Closing of the transaction is subject to approval by the relevant regulators, which should occur during the third quarter of this year.

 

Read the press release here

Volgende publicatie:
APG contribution to Netspar research on housing, care and pension

APG contribution to Netspar research on housing, care and pension

Published on: 1 February 2016

The theme of housing, care and retirement is high on the agenda of the ESC and various ministries. It is also subject within the broad social dialogue pension. From the point of financial planning for the individual household did the Netspar project "Housing and Retirement 'research into better alignment of the three domains.

 

Roadmap integrated approach

The government is taking in favor of a combination of more customization and choice, to better meet the characteristics and preferences of participants. From the point of financial planning for the individual household did the Netspar project group "Housing and Retirement 'research into better alignment of the three domains. On that appeared in early February 2016 "The roadmap to a more integrated approach to housing, care and retirement.

 

Big impact

The connection between housing, care and pension may, by the great impact it has on the financial life planning, relevant to many people, whether they are building up pension, have their own home or in need of additional (elderly) care. Housing takes the connection to retire somewhere else than care. Housing has as retirement savings a role in capital formation /, while care is more an insurance character. Nevertheless, there are relevant links between care and retirement living, think live at home longer by the elderly or the use of a one-off retirement for specific uninsured care needs. The report describes the trends, problems and solutions.