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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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“Economically speaking, this is not a bad time to consume less for a while”

Published on: 24 November 2022

The latest iPhone. A bigger flat screen, with an even clearer picture. ‘Ultra-fast fashion’ with 52 collections in a year, made to be worn for a short time. As a consumer, it can be hard to resist temptation sometimes. And eager buying is good for the economy. But we are also increasingly running into the limits of our consumerism. What are those limits? And what does all that consuming get us? In this series, we invite people from various backgrounds to discuss these issues from their specific point of view. Episode 1: the economic perspective - explained by Charles Kalshoven, macroeconomist at APG. 


“Discounts of up to 90%”, “Bizarre” discounts, “Exclusive one-day deals!”. If there is one day when consumer temptations lurk, it is Black Friday. Some chains even stretch the concept into “Black Weeks”. How big an effect does Black Friday actually have on our economy? And how important is Black Friday to Dutch retail?

Kalshoven: “The fourth quarter is an important quarter for retail, because of the Sinterklaas and Christmas period, among others. In the third quarter, consumption growth stagnated this year. Consumption of durable goods, such as furniture and cars, even slumped, but this was disguised by the fact that demand for services held up. Black Friday may give sales a push in the right direction. In that sense, from a retail perspective, the phenomenon is important. Moreover, the sales on Black Friday provide an indication of what the rest of the fourth quarter will look like.”

How big do you expect the Black Friday effect to be this year?  

“In October, consumer confidence reached a record low of -59 (see box). In November, it reached -57. But that is still well below the average of -9 over the past 20 years and lower than around the time of the euro crisis or the credit crunch in 2007/2008. While this figure is based on consumers’ own judgement and expectations - which do not always match what they do - based on this, I don’t expect exceptionally exuberant consumption on Black Friday 2022. On the other hand, retailers should not be too gloomy either, as on average the outlook for purchasing power is good. After all, the much-needed government compensation measures are coming: the energy cost allowance in November and December, the energy cap as of January 1, 2023 and the minimum wage increase of more than 10 per cent on the same date. Plus, average wage growth in the Netherlands next year should be able to outpace the declining inflation rate.”


How is the consumer confidence rate measured?

“Consumer Confidence provides information on consumers’ confidence and opinions regarding developments in the Dutch economy and in their own financial situation.

Consumers are asked about their opinions on their current financial situation in the past 12 months, their financial situation in the next 12 months, whether they consider it a favorable time for making large purchases, the economic situation in the past 12 months and economic situation in the next 12 months. From each question, the balance of positive and negative responses is taken as a percentage of total responses. Consumer confidence is the mathematical average of these five sub-questions.” (CBS website)

For example, a consumer confidence rating of -57 means that the percentage of consumers who are pessimistic exceeds the percentage of optimists by 57 percent.

So, for the retail sector, you expect a modest positive impact from Black Friday. Does the same apply to the economy in general?

“We currently have high inflation and in the current situation, we are more likely to bring it down if we moderate our consumption for a while now. Energy is scarce at the moment, but so are materials and manpower. If we reduce our consumption for a while, this will dampen demand for all three, so that their prices will also moderate. That would also allow scarce energy to be used where it is most needed - for example, for the furnace of a poor family in a poorly insulated house. So from a macroeconomic perspective, taking our foot off the accelerator is not a bad thing at all.”

So we should get rid of Black Friday?

“We live in a market economy, and that includes stores that cater to all sorts of things. In that sense, Black Friday is nothing new. However, temporary discount promotions can tempt consumers to buy things they don’t actually need. That not only affects consumers in their wallets, it also ultimately impacts the planet. Although that doesn’t always have to be negative impact. For example, I saw that an outdoor sports store is using Black Friday to offer free shoe maintenance and clothing repair on that day. An action like that can create new sales later and thus still contribute to negative ecological impact. But if, as a result, a customer buys one quality jacket for a period when he would normally wear out three jackets of lesser quality, on balance it is better for the planet. So, the question is always: which consumption do you replace with a new purchase? By the way, you cannot leave the sustainability of the economic system entirely to companies. For that, you also need a government that takes a guiding role.”

Consuming fewer products, purchasing more services: is this how we can serve the interests of economic growth in the Netherlands and a livable planet at the same time?

“In principle, yes, although this also depends on the types of services that would replace that product consumption, of course. After all, air travel is also a service, but one with a considerable ecological footprint. For such a transition, a guiding government is needed, which, through taxation, ensures that the least polluting goods and services become more attractive compared to the most polluting ones. And by taxing raw materials more and labor less. Creating more immaterial growth instead of material growth under these conditions is a form of 'decluttering’. It makes less use of resources and more use of brainpower and creativity. These do not reach their limits as quickly, unlike raw materials, which will run out at some point.”

Is that a realistic scenario?

“In the Netherlands, carbon emissions have decreased while the economy has grown. Even if you look at the research done by Andrew McAfee, who wrote the book More from Less about that, you can see that the American economy is becoming less and less resource-intensive. And that’s not because more and more manufacturing has moved to China. Economic growth there is increasingly in added value based on services. One example is brand value, which you create with marketing. So yes, it is definitely possible to achieve economic growth that leans more on services and less on physical products and at the same time reduce the negative ecological impact.”


Volgende publicatie:
What is 2023 going to be like for... my wallet?

What is 2023 going to be like for... my wallet?

Published on: 23 November 2022

A historically tight labor market, sharply fluctuating stock prices and inflation reaching into the double digits. 2022 has been quite an eventful year, economically. But what will 2023 bring us? In this new series, Charles Kalshoven, macroeconomist and senior strategist at APG, tells us what we can expect from the housing market, the labor market and the stock market and more, in the coming year. Today part 1: What is 2023 going to be like for my wallet?

Whether wages will rise faster than the price of the so-called shopping cart, and whether the government will take measures to mitigate the effects of high inflation, are important things to know regarding the content of our wallets. Although there are still many uncertainties, particularly about inflation, Kalshoven does not see things looking bleak for the average Dutch person’s wallet in 2023. However, differences between individuals will be greater than in other years.

Wage increase
Looking at wages, the Central Planning Bureau (CPB), the Dutch Central Bank and others expect them to rise more than 4 percent next year. That may seem a bit meager with inflation at 14.3 percent in October. Consequently, the FNV demanded a 14.3 percent wage increase this month. Kalshoven believes that is not realistic. “Companies will also have higher energy bills and possibly higher rent, so that makes it hard for them to say ‘we’ll provide a raise of over 10 percent.’ They also often can’t fully pass on the increased costs to customers because then they’ll lose market share. A 4 percent wage increase may not seem like much when you look at inflation, but it is higher than we’ve experienced in years.”

The question then becomes what prices will do. Inflation is expected to reach about 10 percent over 2022. The CPB now assumes that inflation will come in at 2.5 percent next year. “That would be a lot lower than the European Central Bank’s expectation of 5.5 percent for inflation across the euro zone. But in and of itself, this is not surprising. In fact, Dutch inflation is well above European inflation this year. Also, the energy ceiling agreed on at the last minute before Prince’s Day will suppress inflation.”

Good to know: the CBS inflation figure for this year is an overestimate of what people will really feel in their wallets. That’s because the basic premise of the masters of calculation is the fiction that every Dutch person signs a new energy contract every month, and thus has to deal with this year’s high variable tariffs. In reality, that only applies to a limited group, because many people have a fixed energy contract. “For next year, therefore, a price decrease will be incorporated into the inflation rate that not everyone will recognize.”

Many workers can expect a wage increase of more than 4 percent

Energy ceiling
If wages actually do rise by 4 percent and inflation remains limited to 2.5 percent, the average person in the Netherlands need not fear a loss of purchasing power next year, especially since the government is assisting with temporary measures, such as the energy cap and an excise tax cut on gasoline. “However, there are big differences between Dutch people. Whereas the average wage increase is about 4 percent, the minimum wage, welfare benefits and the state pension will rise by 10 percent next year. It also makes quite a difference whether you live in a well-insulated house. If you do, you will be more likely to have low energy bills and the energy cap is not even necessary. In that case, you will benefit from wage growth and limited inflation. However, if you live in a poorly insulated house and your energy consumption exceeds the price ceiling, you will be worse off.”

There are ways to temper the effects of high energy prices on the wallet, though. Kalshoven: “When tariffs are low, we don’t pay as much attention to our energy consumption, but now many people are still turning down their heating, taking shorter showers or taking the car less often.”

Just as it matters quite a bit whether you live in a well-insulated house or not, there are other factors that can have a big impact on a person’s wallet. “Static purchasing power is the illusion that nothing changes in your situation, but this is far from true for everyone, of course. Major events in particular really take a bit out of it: for example, divorce, losing your job, or having a child. And renewing your mortgage has become a lot more expensive,” Kalshoven says. “There are also positive examples, of course: your wallet can benefit if you find a (new) job, and you save housing costs if you move in with your partner. These are much bigger effects than you see in the purchasing power charts.”

Slight plus

Despite the fact that we are going into a recession, Kalshoven is optimistic about 2023. “Unemployment will rise slightly, but because of the tightness in the labor market, it will be limited. Many workers can therefore expect a wage increase of more than 4 percent, and the minimums of as much as 10 percent. Inflation will probably end up being considerably lower, at 2 to 3 percent. Then there are the government measures, which help the purchasing power of the average person in the Netherlands, although there will be substantial differences.”

Volgende publicatie:
“A support package of 200 billion euros really is a lot of money”

“A support package of 200 billion euros really is a lot of money”

Published on: 17 November 2022

With inflation skyrocketing, the Dutch government has earmarked tens of billions for purchasing power repair - through the energy price cap, VAT reduction on energy and an energy surcharge for minimum incomes, among other measures. Far-reaching and costly measures were also taken in our neighboring countries to shore up purchasing power. What instruments have other countries chosen for this purpose and what are their advantages and disadvantages? In three articles, macroeconomist Charles Kalshoven (APG) shines a light on one European member state. Episode 1: Germany. 

To ease the burden in 2022 and 2023, the German government has allocated a total of nearly 200 billion. The purse strings have been tightened enormously there too, even though German inflation, at 10.4 percent (October), is a lot lower than Dutch inflation (16.8 percent according to the European definition). Part of that money is spent on various one-time benefits of limited amounts, which are mainly aimed at lower income groups: recipients of unemployment or social benefits, or rent allowance. Another portion is going to tax measures.

Maximum natural gas price
Measures that stand out are the reduction of the energy tax on fuels from June 1 to August 31, 2022 (29.55 cents/liter for gasoline and 14.04 cents/liter for diesel) and the temporary (until the end of March 2024) VAT reduction on gas from 19 to 7 percent. But also noteworthy is the introduction of a €49 public transport monthly pass that allows you to take unlimited (regional) trains, buses and subways. Last but not least, the Germans are introducing a maximum natural gas price for households as well as businesses.

Targeted measures, which can be taken quickly and have limited collateral damage for treasury or other policy goals. Kalshoven believes that that, in a nutshell, is what a government should strive for.

“Effectiveness is paramount. Is a measure hitting its target? There can also be a trade-off between those goals, meaning that the closer you want to get to goal A, the more you sacrifice on goal B and vice versa. Another criterion is efficiency. What costs do you have to incur to achieve the goal? These could be direct costs due to rising national debt, or indirect costs in the form of higher taxes in the future. And are better alternative measures conceivable? A third criterion is speed/feasibility. And finally, you can look at whether or not a measure will disrupt competition.”

Disrupting competition
Regarding the maximum natural gas price Germany has introduced for citizens and businesses, Kalshoven is critical in several respects.

“If you want to accelerate the energy transition, limiting the price is not a good idea. It does not provoke the behavioral response you want, because then there is no longer a price incentive to reduce natural gas consumption. What I like in the Netherlands is that the price cap only applies to average usage. But if you don’t tie such a price ceiling to a quota, it could cost the treasury a lot of money. In terms of poverty prevention, you may have achieved your goal, but in terms of accelerating the energy transition and saving energy, you haven’t. And that is a waste of money. Moreover, a maximum natural gas price like in Germany disrupts competition in the internal European market. After all, unlike in the Netherlands, that maximum also applies to companies and in this way, German companies are given an unfair advantage over their European competitors.”

Car use cheaper
About the promotion of public transport in Germany - the €49-monthly pass - Kalshoven is positive, but he says it does not form a happy combination with the excise tax reduction the Germans implemented for various fuels.

“You have offered people an alternative by making public transport cheaper, but then you should not also make car use cheaper. Germans also have a mileage allowance of 38 cents. That’s really hefty. What I like about the German public transport policy in itself is that it helps prevent poverty and at the same time is good for the energy transition. Namely, you ensure that existing infrastructure is better utilized. That way, road miles can decrease, and the miles you travel by public transport are what you were doing anyway. It may provoke extra travel, but on balance you save energy and, of course, carbon emissions, with that kind of public transport policy.”

Targeted pain relief
If possible, you want targeted pain relief. A dentist doesn’t put patients under anesthesia for drilling; at most, he gives a local freezing. For that reason, Kalshoven is positive about the subsidies and benefits introduced in Germany to ease the pain of inflation.

“Because German subsidies are aimed at low-income earners, they get to people who need it. That targeting is desirable, unlike the drastic remedies the German government has chosen elsewhere, such as excise tax cuts and maximum tariffs.” 

Because those drastic remedies cost the treasury a lot of money, they create a less desirable situation from a macroeconomic perspective. For with an aid package of 200 billion euros, Germany risks working against the monetary policy of the European Central Bank (ECB).

In opposition to each other
Kalshoven: “Germany’s gross domestic product is roughly 4,000 billion euros. An aid package of 200 billion euros amounts to 5 percent of GDP and that really is a lot of money. At a time like that, two policies - fiscal policy and monetary policy - start to work very much in opposition to each other. After all, the ECB wants to slow down the economy to curb inflation. But if governments offset all price increases, they are actually boosting the economy a bit. However, those higher prices are a national loss, even in Germany. It is an illusion to think that you can compensate those higher prices completely and for everyone.”

When you compare the support measures in the Netherlands and Germany, both countries are providing substantial support packages, Kalshoven said.

“In both countries, public finances are in good shape, which makes this kind of package possible. Germany is even more robust than the Netherlands. In our case, the package is about 25 billion euros, which could go up to 40 billion euros, or 4 percent of national income. In Germany, it could even reach 200 billion, or 5 percent of the economy.”

Nice problem
And although Germany, like the Netherlands, is struggling to take targeted measures, Kalshoven notes that the Germans are more successful at supporting lower incomes in a targeted way with one-time payments and specific subsidies. However, this does not apply to the maximum natural gas price in Germany.

“That is in fact not targeted, because it applies to everyone - citizens and companies. In the Netherlands, however, the allowance for energy of 190 euros in November and December is untargeted and price caps are limited. In practice, it proves very difficult to meet the ideal of measures that are both timely, effective and efficient.”

But ultimately that struggle is “a relatively nice problem to have,” Kalshoven says. “A total lack of room for compensation measures would force households to make very painful short-term adjustments.”


Volgende publicatie:
Is a full-time bonus having the desired effect?

Is a full-time bonus having the desired effect?

Published on: 10 November 2022

Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap on whether the full-time bonus will lead to more people working full-time. “You should always encourage a trial.”


Last year, 9.3 million people between the ages of 15 and 75 were employed in the Netherlands, Central Bureau of Statistics (CBS) figures show. Of that total labor force, 48 percent worked part-time, a percentage that has barely changed in recent years. Part-time is defined as a workweek of less than 35 hours. At 70 percent, the percentage of part-time workers among women is significantly higher than among men, 28 percent of whom work part-time. Health care, education and service professions have the highest rates of part-time workers. Because of the significant shortages in education, the government is starting a trial by introducing a full-time bonus in 10 schools. This means that teachers who want to work more will receive a bonus. But does such a financial incentive make sense?



The Netherlands’ progressive tax system plays an important role in this question, Knaap explains. "The more you earn, the more tax you pay and the fewer allowances you get. That is fine in and of itself, but it means that the last day of the work week, whether you work three, four or five days, is taxed the most; on that day you earn the least, comparatively.” The economic term for this is the wedge, which represents the difference between the employer’s labor costs and the employee’s take-home pay. “That wedge can be as high as 70 percent for some people, which means that out of every euro you earn, you only get paid 30 cents. That’s because you are paying payroll taxes and, in addition, possibly losing benefits.”


The question is whether the full-time bonus is the right solution to solve the current labor shortage now. “This is being debated in the House of Representatives and the biggest ambiguity is the size of the wedge.” It is different for everyone and depends on several factors, Knaap explains. For example, on your marital status, whether you have a family and which municipality you live in. “A lot of people also don’t know themselves what their wedge is, some go to a tax consultant to ask what an extra day’s work will get them. So, it’s hard for me to imagine someone deciding to work more hours based on a full-time bonus, when most people don’t know exactly what kind of financial difference that will make for them.”

There are plenty of people who don't have the opportunity to work full time

Homo economicus
This idea stems from the worldview that man is a rational homo economicus (economic man) who calculates the exact costs and benefits of every action. But other aspects besides the financial picture often come into play, Knaap emphasizes. “There are plenty of people who do not have the opportunity to work full-time, even if they wanted to. For example, because they provide informal care for someone close to them, they cannot find child care or an employer cannot offer them more hours. So how are you going to solve that with such a financial measure? It can be done, but I don’t see it as a very effective tool.” Moreover, there is a major drawback to the full-time bonus, the economist said. “It makes our tax system, which we already have little insight into and for which you have to go to a consultant to know what your wedge is, even more complicated.”

Even so, the fact remains that there is an acute labor shortage. “As a macroeconomist, I simply think: if we are all screaming for labor, wages have to go up. That happens naturally, because when there is a shortage in the labor market, wages naturally rise." In the third quarter of this year, collective bargaining wages rose 3.5 percent, according to CBS. Knaap: “And wages may still be raised more than that. We’ve had years when wages didn’t rise much at all. The wage share has certainly not increased in recent decades, so an increase in wages is not that surprising. And it has the advantage of not making the tax system even more complicated and fragile, whereas the full-time bonus does create that risk.”



Despite his impression that a measure like the full-time bonus will have little effect and complicate things further, Knaap welcomes the trial. “If it turns out to be hugely successful, I can adjust my opinion. But if such a trial is tested at your school with a lot of fanfare, you're more likely to have heard of it than if it constitutes yet another measure on your income tax. So it's hard to draw a conclusion based on one trial. Still, it's good that they are trying it first, because too many measures like this just get implemented. Trials like this should therefore always be encouraged.”

Volgende publicatie:
Thijs Knaap at BNR on interest rate trends and declining corporate profits

Thijs Knaap at BNR on interest rate trends and declining corporate profits

Published on: 25 October 2022

Has interest rate development reached its peak? That is a prediction APs chief economist Thijs Knaap does not want to make. As long as inflation is high, you will also see high interest rates. In terms of macroeconomic growth, however, things are against us, and when growth declines, interest rates often decline with it. So those two factors work against each other. Which one is stronger remains to be seen, Knaap thinks.

Other topics discussed during BNR Nieuwsradio’s investor panel included the decision by flash trading company Flow Traders to legally establish itself in Bermuda and the reorganization of Philips, which is cutting 4,000 jobs, including 400 forced layoffs in the Netherlands. The company is under pressure, due to a costly recall of its sleep apnea devices, but says it is also suffering from macro-economic developments.


Knaap: “We know that at some point, macroeconomic problems are going to affect corporate profits. So, the question is: Is Philips the proverbial canary in the coal mine? If you look more broadly at companies’ third-quarter results, you see that while sales are still rising, profits are falling, due to rising prices. This is especially true in Europe, and the decline is stronger than expected.”

As usual, the panelists were also asked about a recent investment transaction. Knaap: “We recently acquired a 49 percent stake on behalf of ABP in Gemini, a solar power project currently under development near Las Vegas. The project will provide energy for more than 400,000 households at peak times.”

Listen to the entire broadcast here (in Dutch).

Volgende publicatie:
Is reduced pension contribution the solution to loss of purchasing power?

Is reduced pension contribution the solution to loss of purchasing power?

Published on: 25 October 2022

Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Alwin Oerlemans (Head of Product Management at APG Asset Management), on whether it is a good idea to temporarily give employees the option to reduce their pension contributions, so that in these times when everything has become more expensive, they can use that money to pay their bills.


Many Dutch people are really feeling the skyrocketing inflation, due in particular to increased energy prices, in their wallets. While the government has now allocated billions to mitigate the effects for citizens, it is not possible to fully compensate for the decline in purchasing power. This is a huge problem especially for low- and moderate-income households with less sustainable homes. Unions would therefore like to see wages rise to the point where there is full compensation. Because this risks sending the Netherlands into a wage-price spiral, - as it did in the 1970s - there are calls here and there to temporarily allow workers to put a reduced pension contribution - so they can use that money to pay their bills. Is that a good idea?

No, says Oerlemans. First of all, because doing that could get people into financial trouble in the future.

“From the perspective of behavioral economics, we know that people value money now more highly than money later. If you give employees the option of a reduced pension contribution temporarily, it will be at the expense of their pension accrual. To see that this is a shortsighted idea, you need only look at Chile, for example. When the economy there stalled during the Covid crisis, Chileans were given the option to withdraw an advance on their pension money. As a result, Chile's pension pots seriously shrank. The government would have been better off helping the vulnerable instead, because it was mainly the small pension pots that were depleted by one-time withdrawals. It is not without reason that the recently released Mercer CFA Institute Global Pension Index 2022 warns against premature withdrawal of pension money.”

Cigar from your own box
According to Oerlemans, the option to temporarily reduce premiums is also not a good idea because for employees it is just a cigar from their own box. And now is not the time for that.

“Because reduced premium contributions result in a reduced pension accrual, - and thus less pension - employees end up paying for the purchasing power compensation themselves. Only they’re not paying now, but in the future. People should get a higher wage now, not a cigar from their own box. Because big companies’ profits did rise in recent years, and that is much less the case for employees’ wages. Unions are rightly making the case for higher wages. This gives workers a fair share of added value. This is how the ratio of wages to profits can shift.”

The Netherlands: an export country
Those higher wages are no luxury, because high inflation is here to stay for a while, Oerlemans expects.

 “Even before the war in Ukraine, inflation was rising, due to disruptions in production chains caused by Covid. The Russian invasion then led to a sharp rise in commodity prices and energy prices in particular. So, inflation will persist for now, especially with a continuing war.”

Oerlemans does not want an exporting country like the Netherlands to price itself out of the market with higher wages.

“This fear seems exaggerated to me. Because of the tightness in the labor market, there is room for higher wages. That is also good for the labor supply, because it makes more worthwhile to work. In Australia, when there was an impending wage-price spiral, that was when pension accrual increased. There, the pension system started in the 1990s, when there was an overheated economy and inflation. Employers then started pouring some of the extra pay into the new mandatory pension system.”

All in all, then, it is not a good idea to temporarily allow employees to reduce their pension contributions, even if it is, say, up to 50% of the contribution?

“No. There is nothing wrong with a little flexibility in the premium as part of the benefits package, but not to that extent. If you give employees the option to remove such a significant portion of their pension contributions, even if only temporarily, that’s still a cigar out of their own box.”

Volgende publicatie:
How effective is the European Commission’s energy plan?

How effective is the European Commission’s energy plan?

Published on: 21 September 2022

Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: equity investor Martijn Olthof, on the European Commission's crisis plan to meet the challenges of exploding natural gas and electricity prices. “The developments in the energy markets are hurting consumers, no matter what and there is nothing you can do about that. All you can do is spread out the pain.”

As the effects of sharply increased natural gas and electricity prices become painfully obvious to more and more citizens and companies, the European Commission (EC) launched a plan on Sept. 14, 2022. The three main measures in this energy emergency plan: a price cap for fixed-cost electricity producers, an additional tax on the profits of oil and gas companies and a mandate for EU member states to consume less energy. 

The proposal contains market interventions that were not thought possible in Europe until recently. The question therefore arises: how effective are the intended measures really? Olthof goes through them one by one.

Price cap on power

“For electricity from nuclear power plants, hydropower plants, solar farms, wind farms and lignite-coal power plants, the European Commission wants to apply a maximum output of 180 euros per megawatt hour. Such a price cap is in itself a logical step, since the cost of generating this electricity has hardly gone up - unlike electricity from gas-fired or coal-fired power plants. Meanwhile, the price of electricity has gone through the roof ten times over, leaving producers with fixed costs making excessive profits. It is understandable that the EC is creating a mechanism to skim them off and use that money for users who need it most.”

Member states may also set a price cap lower than 180 euros. That would give more air to customers who need a lot of electricity for their production process, such as aluminum producers.


“For a producer of electricity not generated via gas or coal, 180 euros is still an extremely good price. But for customers who use a lot of electricity for their production process, such as aluminum producers, that rate is disastrous for competitiveness. So a lower price ceiling is preferable, but also not so low that it discourages producers of renewable energy from making new investments in, for example, wind turbines and solar parks. That is also the reason why the EC did not want to set it too low.”

Extra taxes for oil and gas companies

It’s not just fixed-cost power producers that are the lucky ones in today's electricity market. So are oil and gas companies. The second measure in the EC plan is therefore to have these companies pay a third of their profits as a “solidarity contribution” and use the proceeds to relieve citizens and other companies. But again, Olthof says the dosage is important.

“Oil and gas companies are making a lot of money right now. The gas they extract elsewhere in the world and bring to Europe is suddenly worth five times as much here now. As a result, it is fairly easy to say that they can afford the extra tax. To a certain extent, it is logical to skim off their profits. But to compensate for the loss of Russian natural gas supply, we will have to look for alternative natural gas supplies in addition to expanding wind and solar energy. If Europe skims off the profits of oil and gas companies too much, it will no longer be attractive for them to invest in this search. To drill new gas fields, companies like Shell or BP will then choose the U.S. rather than the North Sea. As a result, less gas will come to Europe, and we do need that gas.”

Following the plan announced in mid-September, the EC is looking at whether it can intervene further in the natural gas market. However, it is still remains to be seen how that will play out, Olthof says. 

“On the international market, the gas price is determined by LNG. That is liquefied gas, which can be traded worldwide and sent anywhere by ship. Basically, those ships go where the price is highest. In recent years, the price for LNG moved along with the price of gas in Europe. When the price in Europe was very low because of an overcapacity of gas in the world, the LNG price was also at that low level. Now there is scarcity in the world gas market. The European gas price is sky-high and so is the price on the international market for LNG. Available LNG now goes to Europe, because even now it is the highest bidder. Proponents of a price cap for natural gas in Europe assume that an artificial price cut in Europe is bound to lead to a similar movement in the international LNG price - which Europe can then still buy that liquid gas for.”

But it is questionable whether that is the case, Olthof says. “If other buyers of LNG, such as Japan or Korea, are willing to pay more than the maximum price in Europe, then Europe will not get this gas. There will still be LNG coming to Europe on long-term contracts, but the portion not yet sold will go to Asia. Southern Europe is in favor of a European maximum price for gas but Northern Europe is not, so there is still a lot of wrangling and debate about that.”

Consume less electricity
The third measure in the EC’s energy emergency plan focuses on reducing electricity demand. Member states are asked to reduce consumption by 5 percent at times of peak electricity demand and to reduce total consumption by 10 percent in the long term.

Olthof: “How they achieve that 5 percent reduction is up to member states to decide. In any case, they are given the option of offering financial compensation to energy-intensive companies to shut down production at peak times. But for achieving the 10 percent target, not very many tools, rules or details have been disclosed yet.”

So the effectiveness of the energy contingency plan depends mainly on the dosage that member states choose to use in utilizing the tools put in their hands for this purpose? 

Olthof: “Yes. The EC in itself has proposed good measures to deal with this crisis, but from the perspective of energy-intensive companies it is not yet sufficient. These companies will have to wait and see if individual member states will do more, and how they will distribute the skimmed-off profits. Either way, developments in energy markets are hurting consumers, and there’s nothing you can do about that. All you can do is spread out the pain – as best you can.”

Volgende publicatie:
What is causing the huge labor shortage?

What is causing the huge labor shortage?

Published on: 8 September 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: macroeconomist and senior strategist Charles Kalshoven about the causes of the huge labor shortage.


Anyone who passes by a café can hardly fail to notice it: many catering establishments are trying to find staff with a poster in the window. But not only the hospitality industry is struggling with a lack of staff. The labor shortage is spread out across several sectors. What are the causes of this? And are there any solutions?


Covid and aging

Kalshoven believes there are two main causes. “The most obvious one is Covid. During the Covid crisis, many companies that would normally have gone bankrupt were kept afloat with government support. The number of bankruptcies is therefore much lower than normal. Employees are therefore still working at those companies, when they would otherwise be available for other jobs.” Covid not only affected the demand for personnel, but also caused a shift in the labor market. “In the hospitality industry and at Schiphol Airport there was temporarily less or no work. The people who worked there then started doing something else. Some of them found new work they enjoyed more or that paid better, so they decided to stay there.”


The other main cause is aging. “On the one hand, because of the aging population, the need for personnel in healthcare is increasing. If nothing changes in the coming years, 1 in 4 working people will be needed in care around 2040. You might expect that the aging of the population will also reduce the supply of labor, but for the time being this does not seem to be the case. Not only is the number of 20- to 70-year-olds still creeping up a bit, but the proportion of ‘active’ people is also rising. The labor force participation rate has never been higher since record-keeping of that began in 1969.”


Kalshoven points out that this is partly due to the increased retirement age, which means that more people over 65 are now working than before. “I think the changing age profile of society, with more older people and fewer young people - in the last decade the over-50s group grew substantially, but the over-40s group has fallen by 17 percent - is playing a role in the shortages in sectors that require a certain level of fitness. These include construction, the police, emergency rooms and baggage handlers at Schiphol Airport. And people who no longer can or wish to practice a profession at a later age will not always have the skills to find work elsewhere. A retiring police officer, for example, is not necessarily a good programmer.”



Although the causes are obvious, the labor shortage is not easy to solve. “In the past, it might have been a little easier by using labor migration. At that time, the shortages here were filled by Filipino nurses or Polish construction workers. But because of the current housing shortage, you can’t house those migrants now. Just as absenteeism reinforces the labor shortage, the housing shortage contributes to the labor shortage.” Another solution could be for the government or a sector to try to interest young people in a specific study, for example in engineering. “But that too is not always easy. Because supervising trainees requires an investment of time. And if the workload is already too much, who will let the interns gain experience in the workplace?”


What can also help is to try to persuade people who are currently working part-time to work more. “This is also where practical objections often come into play, such as expensive or unavailable childcare. Through higher wages, a company can try to attract new people. You might be able to attract new entrants to the labor market, but you often see that people from another sector or company will switch to the better paid job. This mainly leads to a different distribution of labor between companies or sectors. In and of itself, incidentally, that is positive for the economy: workers end up in a place where they are apparently more productive.” When there is a major labor shortage, as there is now, employers often are less adamant about the job requirements when there are openings, Kalshoven argues. “You see vacancies now where it says you don’t have to have completed your education yet. There’s a word for that: green pickings. As an employer, you pick the fruits that are not yet ripe, as it were. But that creates a risk that young people will not complete their education after getting the job, which could affect them later in their career.”  



And then there is automation and robotics as a solution. “You can already see that ordering in the hospitality industry today is a lot faster than it used to be. Now the waitress passes your order to the bar on a smart phone, where someone can immediately start preparing your drink. That prevents mistakes and saves time.” And you can let people do more themselves. “Before, you went to the bank where someone counted out the guilders or dollars for you. Later, you had to take your debit card to a machine to withdraw money. Nowadays you pay with your phone at the cashier. In fact, often there isn’t even a cashier, because nowadays you pay for your groceries yourself. These kinds of technological solutions are also a partial solution to the labor shortage.”


And will a recession relieve some of the pressure on the labor market? “The labor market always reacts to the economy with a delay. The economy has to grow for a while first, before people are hired. An increase in wages often follows a bit later. If the economy crashes now, companies will wonder whether it will be short- or long-term. Regardless, the recession will ease the scarcity as more companies go out of business and others wait a while before expanding. I do think that the labor market will be structurally more restricted due to the aging of the population. There are a lot of professional groups where the average age is quite high and an outflow is imminent.”

Volgende publicatie:
Does lower consumer spending have any economic benefits?

Does lower consumer spending have any economic benefits?

Published on: 1 September 2022

Current issues related to economics, (responsible) investment, pensions and income: every week, an APG expert gives a clear answer to the question of the week. This time: macroeconomist and senior strategist Charles Kalshoven on the positive flip side of massive consumer spending cuts. “The current situation, in which high inflation forces lower spending, has mainly shadow sides. But we cannot deny that there are also some bright spots.”


Particularly - but not only - due to the war in Ukraine, price levels have soared in the space of six months. Energy prices are at the top of the list and are prompting people in the Netherlands to drastically cut back on their spending. Total domestic consumption in June still showed an increase compared to the previous year, but the question is how long this growth will last. Inflation has risen further since then and it seems only a matter of time before consumer spending will decrease. Consumer confidence and willingness to buy fell to record lows in August.


Personnel leaving
For some, the increased price level is an inconvenience, but for others it can be the financial death blow, making a trip to the food bank unavoidable. Bad news for many businesses and consumers. But do consumer savings also offer advantages?  According to Kalshoven, they do, firstly because they prevent the economy from overheating, and secondly because the cause of those savings - mainly increased energy prices - can shift the energy transition into a higher gear. Moreover, high prices can introduce people to options they had never seriously considered before, and lead to more flexibility in dealing with future changes.

Kalshoven: “Macroeconomically, we are getting this inflation because the supply of some key products and services is not matching demand. Demand has recovered after Corona, but there is still a shortage of supply. This is due to the aftermath of lockdowns in China, for example, but also because staff in the hospitality industry or at Schiphol Airport have been leaving. But the most obvious reason is, of course, energy. Shortages - or the risk thereof - have caused prices to explode. If consumers save on energy, this will help to keep prices down. More generally, cutting spending will prevent the economy from overheating - and thus inflation - if there are bottlenecks on the supply side.”


Exorbitant loans
Less frequent visits to restaurants, for instance, may help to alleviate the shortage of hospitality staff - who left the sector in large numbers during the pandemic and did not return afterwards - becomes less acute, says Kalshoven. And there are other examples.

“The risk of a situation arising in which the demand for hospitality personnel far outstrips supply is reduced - and with it the risk of exorbitant wage increases. The same applies to the aviation sector. If people start flying less, the personnel shortage at Schiphol and other airports will also become less of a problem. But the biggest factor is, of course, energy. If people take shorter showers and lower the thermostat, the demand for energy drops. If those who can easily cope with the higher energy tariffs also reduce their consumption, they will help to replenish the gas reserves and keep the prices down. In so doing, they will be showing solidarity with the lower income groups, who simply cannot afford these high prices.”




Lower energy consumption is obviously also better for the climate. High energy prices can also be a catalyst for the transition to sustainable energy. Part of this is really about saving energy, for example by insulating the house or taking a shower for a shorter period of time. 


Kalshoven: “This extremely expensive energy accelerates many people’s ambition to become more sustainable, provided they can afford it and it is possible in their home, for example. Not everyone has the means to invest in a heat pump or solar panels, for example, and for people who rent an old, draughty house from a landlord those options are not available anyway.”

The higher price level and less spending can also contribute to greater sustainability in another respect. 

“The fact that transport has also become more expensive can have a positive effect on the sale of seasonal and regional products, such as fruit and vegetables. A Dutch consumer, for example, may now be more inclined to opt for an apple grown in the Netherlands instead of one from New Zealand. And that in turn has a reducing effect on carbon emissions.”


“Mother of invention”
According to Kalshoven, the increased price level and lower spending pattern can also have a positive effect on your mind set.

“The fact that we are forced to change now makes us more flexible in the future. And necessity is the mother of invention. People who find themselves in deep financial difficulty because of rising prices are more likely to make biased choices. But for others, a need for change can also spur creativity and lead to choices that they will be happy with in retrospect. Large price increases can give someone just the push they need to try an alternative that they had never seriously considered before. If you have never cycled to work, you might try it now. And if it works out surprisingly well, you may find that you don’t want to go back to the old situation.”


Collective impoverishment
So we should see the high prices for energy and food, among other things, as a blessing in disguise? Kalshoven does not want to go that far.

“Whichever way you look at it, we are dealing with a collective impoverishment in the Netherlands. We used to be a gas-exporting country. But now we have to buy more gas from abroad, and because gas has become more expensive, that leads to a loss of terms of trade. At an individual level, the effects of this can be very dramatic. It is clear that the current situation, in which high inflation forces lower spending, has mainly downsides, but we cannot deny that there are also some bright spots.”


Volgende publicatie:
How a city can benefit from organizing a major sports event

How a city can benefit from organizing a major sports event

Published on: 25 August 2022

The first three stages of the Tour of Spain were held in the Netherlands this year. Total costs: almost 15 million euros. Will it be limited to those costs? And are the hotel and restaurant revenues the only benefits of the Vuelta for the Dutch start and finish locations? The benefits of organizing a major sporting event are often broader than the direct economic benefits. But the budgeted costs are also often higher. Charles Kalshoven, macroeconomist and senior strategist at APG, explains why.

Organizers of major sporting events often tell a narrative that paints a rosy picture of the economic benefits, Kalshoven knows. “But that can’t always be substantiated. If there are any benefits at all, they go to the hospitality sector, for example, and not to the municipality or government.” According to the economist, the fact that a sporting event does not always bring in money for the host city is no reason not to organize one. “It can also just be fun, and it´s okay for fun things to cost money sometimes.”


Kalshoven acknowledges that this is a tricky message in these times, “because many people are currently struggling to pay their energy bills, so should you be spending 15 million on the Vuelta?” Incidentally, one third of the expenditure is provided by private parties, so it costs the national and municipal governments “only” 10 million euros (for comparison, the total expenditure of the municipality of Utrecht this year is budgeted at over 1.5 billion). Nevertheless, partly due to the high costs of the energy crisis, Utrecht will not be organizing any more major sporting events for the time being, Mayor Dijksma announced in Trouw.


“If you look at it from a purely economic perspective, the organizers of major sporting events usually don’t end up in the black afterwards,” Kalshoven said. VAT and excise duty on the beer sold, for example, do not go to the municipality but to central government. But the benefits, he says, are also broader. “In Barcelona, for example, for the 1992 Olympics, they refurbished the whole neighborhood of Barceloneta and the beach and developed Port Olímpic as an entertainment area. So the Games were used there to kick-start urban development.” And there may be more such indirect benefits. “If, like Utrecht, you’ve hosted all three major cycling tours, you may be playing into the hands of conference organizers. And companies working in the sustainable mobility sector may see Utrecht as a suitable location. It may also generate more tourism. The aerial images of the Dom and the canals are a kind of ‘free’ advertising for the city. It is a way for a city to show its best-kept secrets to the world.”

Experience Economy

Costs incurred to organize a sporting event can also be seen as an investment in health or welfare policy. For example, Utrecht was recently named the most bicycle-friendly city in the world. “If people start cycling more often instead of taking the car or public transport, there will be fewer traffic jams. That saves society money. And perhaps in the longer term, healthcare costs as well, because a sporting event can encourage people to participate more in sport, thus keeping them healthier for longer,” Kalshoven says. “You shouldn’t exaggerate these indirect effects, but if you wait for scientific evidence of the economic benefits of a sporting event, you’ll never be able to organize anything.”

If you want to push through the organization of a tournament, you have to reduce the price tag

Kalshoven: “Organizing a sporting event also fits in with the trend that people prefer to spend money on immaterial rather than material things: so-called ‘de-cluttering’. If visitors spend 30 million euros during a sporting event, the question is: what else would they have done with that money? Perhaps they would have spent it anyway, in which case the economic effect is zero. But it is also possible that they would have spent it on, I don’t know, plastic toys from China. That’s not very sustainable and it also contributes very little to the Dutch economy.” Whereas the Vuelta is part of the experience economy, where people spend money on an experience rather than on stuff. “That’s more sustainable, because it requires fewer raw materials. People do have to get to Utrecht, of course, so there will definitely be some carbon emissions, but maybe many will come by train or bike.” The advertising caravan, which traditionally precedes the race, will at least have a sustainable character this Vuelta during the Dutch phases. The vehicles in this “Green Caravan” drive emission free and only hand out sustainable items to the public.

Olympic Games

Yet it seems that fewer and fewer cities are in favor of organizing a major sports event. This is particularly true of the Olympic Games, where there was only one candidate city for the 2024, 2028 and 2032 editions. Amsterdam toyed with the idea of standing as a candidate for 2028 for a while, but the government ultimately decided it was too expensive and withdrew its support for the plan in 2012. “Organizing an event like that does put a strain on collective resources,” Kalshoven continues. “There are the direct costs for the organization, but also indirect costs for the deployment of police, fire department and emergency services. What you see is that the economic benefits of the event itself are often negative. The profits end up somewhere else, for example with catering businesses.”


The fact that the budget is often out of control also does not contribute to the enthusiasm among the local population. Here, too, the Olympic Games are a good example. For instance, the costs of the so successful Games in Barcelona ended up 266 percent higher. In 1976, in Montreal, Canada, it was as much as 720 percent. What is the cause of this? “An important part is political. If you want to push through the organization of a tournament, you have to reduce the price tag. Large budgets would prevent surprises, but damage your chances. So, the organization pushes for low quotes from builders of stadiums and infrastructure, but the setbacks are being paid for dearly. The problem, of course, is also that the projects are always unique, because you never build the same stadium twice."  


Whereas enthusiasm for hosting major sporting events seems to be waning in democratic countries, autocratic regimes are actually eager to welcome international tournaments. “There, the political benefits are often huge,” Kalshoven argues. “Russia, with the Sochi Winter Games, and China, where Beijing hosted both the Summer and Winter Games, were thrilled to be able to show the world that they were capable of hosting something like this. A good opening and closing ceremony is advertising to the outside world and also contributes to popular pride in the national regime. The political benefits outweigh the economic costs there. For Rutte it would be difficult to explain why there is money for the Olympics but not for, say, purchasing power measures. For Putin this is less of an issue. If he organizes such an event, he does not have to explain to his people why there is money for organizing the Winter Games but not for raising civil servants’ salaries.”

Volgende publicatie:
"It's crucial we have this grain agreement, but the situation still looks fragile"

"It's crucial we have this grain agreement, but the situation still looks fragile"

Published on: 23 August 2022

After the Russian invasion of Ukraine, it became a commonly used term. The country was the 'granary of Europe'. As a result of the conflict, the export of Ukrainian grain largely came to a standstill. After mediation by Turkey and the United Nations, it seems possible to get grain across the Black Sea from Ukraine again. How is Netherlands affected by this? And what are the prospects for the grain price? Time to ask Peter Verbaken, Head of the Raw Materials Team at APG, some questions about the grain trade.

Grain is a collective name for the seeds of grasses and includes rice, barley, wheat and maize. Ukraine mainly exports the latter two. The global annual production of wheat is about 780 million tons, according to figures published by the United States Department of Agriculture. Ukraine accounts for 30 million tons of this. The EU is the largest producer, with nearly 140 million tons, closely followed by China. 1,200 million tons of maize is produced annually, nearly a third of which comes from the United States. With an annual production of 40 million tons, Ukraine seems to be living up to its name as the granary of Europe when it comes to maize.

Is the Netherlands self-sufficient when it comes to grain?
"The Netherlands isn't self-sufficient. This is because the agricultural land here is more suitable for growing other crops. We therefore import more than 80% of the wheat we use here, mainly from Germany and France. Incidentally, only 40% of the wheat used in the Netherlands is intended for human consumption, the remaining 60% is intended for animal feed. For maize this is as high as 65%. About 20% is consumed by humans and 15% of the maize in the Netherlands is processed into biofuel."

France and Germany are safe countries with stable exports. So why is it that the Netherlands also has to deal with higher grain prices?
"Grains are globally tradeable commodities. If a major supplier drops out, as currently is temporarily the case with Ukraine, this will have an effect on the worldwide price of grains, and therefore also on the price we pay here in the Netherlands. That's how such a market works. You can't say: "My imports from France haven't been affected, so I pay the same low price as a year ago." The price of grain from countries such as Germany and France is also determined on the basis of the world price, because grain can in principle be shipped anywhere. Because we mainly get our wheat from France and Germany, we won't have a grain shortage here any time soon. But grain prices immediately rose here as well at the start of the war in Ukraine."

In Europe it has been hot and dry for a long time now, which can have consequences for the harvest

Normally, Ukrainian grain is mainly exported to North Africa and the Middle East. Can they breathe a sigh of relief now that Turkey and the UN mediate in the export?
"The agreement signed at the end of July has yet to prove its worth. There is still a lot of uncertainty as to whether the flow of ships will really get going to transport the grain from the Ukrainian ports across the Black Sea to the places of destination, without incident. That will become apparent in the next few months. It is very important this agreement is in place, but the situation still looks fragile. We had the explosions a few days ago at the Russian base in Crimea, for example. Turkey has a direct interest in the warring parties adhering to the agreement, because the country is one of the major importers of Ukrainian grain. So, like Egypt and other countries in the region, it really needs that grain."

Do you know anything about how the price of grain will develop in the coming months?
"Currently, the wheat price is in any case lower than before the Russian invasion. That's still relatively high, but not as extremely high as in the first phase of the war. The coming months will show whether the grain agreement will be implemented. Observers are hopeful, as a result of which the wheat price has already dropped considerably. However, should the conflict escalate again, the price will certainly rise again. The new harvest in the grain-producing countries in the northern hemisphere will take place shortly after the summer. It will then become clear to Ukraine to what extent the war has affected grain production. All grain producers are dependent on the weather for their harvest. In Europe, for example, it has been hot and dry for a long time now, which can have consequences for the harvest. For the time being, we're hearing positive reports from America about this summer's grain production. The weather has the potential to provide relief if it leads to a rich harvest, but can also pose a risk and lead to further shortages and higher prices."

Volgende publicatie:
How does the drought affect investors?

How does the drought affect investors?

Published on: 18 August 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Climate Data Specialist Lucas Wouters talks about the impact of prolonged drought on investments.


Extreme drought in Italy’s Po Valley, forest fires throughout the Mediterranean and historically low water levels in the Rhine. All of Europe is suffering from a precipitation deficit this summer. And the drought is not incidental. “It’s not a question of if the drought will get worse than it is now, in the long- term; it’s a given that it will,” says Wouters. “About 20% of the carbon we are emitting now will still be in the air in a thousand years. So our current emissions will still have a long-lasting effect on future temperature increases, with all the consequences that will entail. Droughts will last longer and be more severe.” 



Climate change will lead to increasing droughts in certain parts of the world, which will affect water supplies, among other things, Wouters argues. “And that in turn has consequences for agricultural production, as well as for industries that depend on a stable water supply to produce consumer goods and materials, for example, and for the energy sector, which uses a lot of water to cool power plants or to generate energy with steam turbines or hydropower. Such impacts will in turn affect the entire economy, making the increasing drought a potential risk for investors.” According to a study done by the World Bank, drought could lead to a loss of 6 percent of gross domestic product in certain countries by 2050. That would involve water shortages and the consequences of that, such as crop failures. A long-term investor like APG therefore looks at the potential impact of climate factors, including drought, in all its investments, and analyzes the potential risks and returns.


A tangible example is investments in agriculture and forestry, grouped together at APG under the heading Private Natural Capital. “In agriculture, the presence of reliable water sources is a key indicator of a good harvest,” Wouters says. “That’s why, for potential investments, we assess whether there is enough capacity in the surrounding area to secure sufficient water for the intended operations. In addition, innovation with respect to irrigation is an important aspect in protecting the harvest. In Romania, we are investing in a project that involves working with local parties to repair, improve and expand irrigation networks, which often also save water and energy.

APG also urges managers of land that is invested in to cover any climate risks. “In agriculture, for example, this involves leaving land fallow as little as possible, thus preventing evaporation. This improves the quality of the soil, so that it can absorb more water. The crops to be grown are also determined by the water that is available in the longer term. In forestry we expect the managers to have fire extinguishing facilities in place, in case persistent drought leads to forest fires. We also want fire prevention to be taken into account in the management and layout of forests. We use climate scenarios to assess potential investments. We won’t take on investments in which the impact of climate change is too great.

97 percent of all water on Earth is salty, and most of the rest is frozen


To counteract the negative effects of drought on investments, APG encourages companies to do more to adapt. This can be done, for example, by creating on-site water reservoirs around properties and farms. APG also works with external data sources to monitor climate change and the consequences thereof. Wouters: “Our real estate team, for example, has developed a method that measures physical climate risks for our investments. In this way, we want to make the real estate we invest in more climate-resistant.” For its pension fund clients, APG invests in the American company Xylem. This company offers solutions that promote efficient water use and so prevent water scarcity. Examples include the transport, purification and reuse of water. Closer to home, APG invests in a number of green bonds issued by the Nederlandse Waterschapbank (Netherlands Water Boards Bank), which include water bonds. This sustainable water bank uses the proceeds to better prepare the Netherlands for the consequences of climate change by financing projects and companies that focus on flood risk, water management, water quality and biodiversity.



Due to increasing drought, it is becoming increasingly important to conserve water. This offers interesting opportunities for investments in, for example, water technology companies and water treatment plants, Wouters explains. “In the Netherlands, we have high quality drinking water; in many other countries there is a shortage. Of all the water on earth, 97 percent is salty and most of the remaining water is frozen, as in glaciers. Technologies already exist to desalinate seawater, but the technology is still very expensive and the process still uses a lot of energy. If a company succeeded in converting part of that 97 percent salt water into drinking water more efficiently, it will have struck gold.”


There are also opportunities to invest in techniques that make water use in buildings more efficient. “APG invests in The Student Hotel, on behalf of our fund client ABP. The showers there have meters so that hotel guests can see exactly how much water they are using. This encourages guests to take shorter showers and thus use less water. That is a small contribution to the solution, of course, but it does indicate that there are opportunities to contribute to combating drought through our investments.”



Volgende publicatie:
How dependent on China is the Dutch economy, really?

How dependent on China is the Dutch economy, really?

Published on: 10 August 2022

Current issues related to economics, (responsible) investment, pensions and income: every week, an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap on the question of how dependent on China the Dutch economy is. “An economic disconnection from China will have even greater consequences than the disconnection from Russia.”

Last week, Speaker of the U.S. House of Representatives Nancy Pelosi visited Taiwan. The controversial visit raised tensions between the US and China. A conflict of the two economic superpowers over Taiwan thus seems another step closer. “Open trade nations like the Netherlands, with the recent lessons from the Ukraine crisis, need to prepare for this new geopolitical reality faster,” Jonathan Holslag, a political scientist at the Free University of Brussels, argues in NRC. “We need to reduce our economic dependencies on China faster, or the price threatens to get even higher in the coming years.” But how dependent on China are we really, in the Netherlands?

Equity Blow

After Russia’s invasion of Ukraine, Western countries imposed hefty sanctions on Moscow. That move can serve as an example of what happens when the U.S. and the EU want to disengage economically from China, Knaap argues. “The example of Russia shows that there are different degrees of dependency. The first is ownership of - in this case - Western equity in Russia or China. Dutch investors have interests in Russian companies, and Russian companies and individuals have assets abroad. In other words, there are financial links. Is that dependence? Yes, because after the war broke out, it became clear to both Western investors and Russian oligarchs that their interests were not safe. If the West breaks off relations with Beijing tomorrow, so to speak, it is quite possible that an immense financial blow to both parties will follow. Although China’s share among Dutch investors is not huge, the amounts involved are substantial. And that loss will be instantaneous.”


The second form of dependence is trade relations, both of goods and of technology. Of everything we import into the Netherlands, 12.4 percent comes from China. A hefty portion, but it also masks the bigger picture, Knaap said. “The example of Russia really demonstrates very well the importance of the so-called second-order effects. For example, we are not that dependent on Russian gas, but the Germans are. And if they have a gas shortage, we will also have one. We can also see it in imports of, for example, fertilizer from Germany, because the chemical companies there need gas for their production. It is therefore very misleading to look only at the direct economic consequences for the Netherlands, because these days almost all production chains run through several countries. The indirect effects are therefore even greater.”

Corona crisis

“Whereas the severing of economic relations with Russia mainly shows how dependent Europe is on Russian fossil fuels, an economic disconnection from China will have even greater consequences," Knaap said. “You can already see that when you look at that Chinese share of 12.4 percent of Dutch imports. If imports were to shrink by such a percentage, that would be a huge economic blow. And that doesn't even include the fact that the other countries the Netherlands trades with also import a lot from China. At the time of the corona crisis, we noticed in Europe how dependent we were on Chinese products. Chinese ports were closed, and you couldn’t even get a bicycle in the Netherlands because we were out of parts. So, it’s very difficult to cut a country out of the supply chain, especially China.”

The downside of everyone earning well here is that it costs a lot to manufacture products here

According to Holslag, in NRC, the Netherlands and other European countries need to become more self-sufficient so that we are prepared if things go wrong with China down the road. “That’s one way of looking at it,” Knaap responds. “For a very long time the prevailing thought was: as long as we have very strong economic ties, we can’t afford war. You can see that it works too, because despite the rhetorical arm-twisting between Beijing and Washington, the two countries are still doing plenty of trade. So that economic dependence is there, and that also applies to China. If the West stops buying Chinese products, they will have just as much of a problem there. So, it is costly for both sides to stop globalization.”

Yet companies seem more reluctant than before to invest in China. Causes are the strict lockdowns, particularly in Shanghai, and the somewhat disappointing growth figures. The tensions around Taiwan are also not going to increase enthusiasm about China among foreign investors. Knaap points to the “China+1” approach that some companies are taking. This means that they build one factory in China and one factory in another low-wage country such as Vietnam or India, which can then serve as a backup, should something go wrong in the (trade) relations with China.


However, it is not an easy task to turn Europe into a manufacturing center again, like China is now, Knaap argues. “If we have to start manufacturing everything ourselves, the inflation we are seeing now is nothing compared to what we will be facing then. The downside of everyone earning well here is that it costs a lot to manufacture products here. Much of our prosperity is due to globalization. We got a little spoiled by getting lots of stuff for little money from low-wage countries. In recent decades they have become very good at manufacturing all kinds of products, while we have somewhat lost that art. It will therefore probably take years to set up a manufacturing industry here again.”

So, for the time being, the Dutch economy is largely dependent on China. There is the financial dependence, but especially the dependence on Chinese products, both directly and through trade with other countries that are also dependent on China. “The fact is that China has developed into an almost untouchably competitive manufacturing economy. They are more expensive than before but still not very expensive, super productive and they can deliver tomorrow if they have to. China's trade figures are only going up, right through all the economic crises. They know exactly what we want, and they sell it to us in large quantities.”

Volgende publicatie:
Will the ECB interest rate hike lead to lower house prices?

Will the ECB interest rate hike lead to lower house prices?

Published on: 28 July 2022

Current issues related to economics, (responsible) investment, pensions and income: every week, an APG expert gives a clear answer to the question of the week. This time: Vincent Fokke, Head of Listed Real Estate Europe, on whether the European Central Bank’s (ECB) recent interest rate move will lead to a cooling of the Dutch housing market. “The housing market is not purely driven by rational investment decisions. Often, emotional considerations play a bigger role.”


In an attempt to suppress high inflation, on July 21, 2022, the European Central Bank raised the deposit rate - the interest rate banks receive when they deposit excess money with the ECB - from -0.5 percent to 0 percent. A significant step - in a historical sense, since the ECB had not raised interest rates for over a decade, but also because such an adjustment of 0.5 percentage point does not normally happen in one go. And, the ECB’s expectations for the coming months showed that the end of the rise does not seem to be in sight.  


Will those rising ECB interest rates also lead to higher mortgage rates, so that the Dutch housing market can finally cool down a bit after years of big price increases? According to Fokke, the people who are looking forward to this should not rejoice too soon. If only because the ECB interest rate is not the most decisive factor for the level of mortgage rates.

“With negative deposit rates, banks have a strong incentive to put out ‘excess’ money. That may contribute somewhat to a higher supply of mortgage loans, resulting in a depressing effect on mortgage rates. However, ultimately, mortgage rates are not so much related to the ECB rate, but to a greater extent to long-term capital market rates. The interest rate on government bonds - for example on Dutch government bonds with a maturity of ten or thirty years - is therefore a much more important reference point for the mortgage market than the ECB interest rate. That also explains why we have seen a strong upward movement in mortgage rates over the past seven months. Because from January to mid-June, capital market rates rose sharply, while the ECB rate hike had yet to take place at that time.”      


Quite dynamic
After mid-June, however, capital market rates dropped significantly again. So, can we now expect lower mortgage rates again? That seems a bit premature.

“Due to the current geopolitical situation and the reversal of monetary policy - the ECB has raised interest rates, but since July has also stopped net bond purchases to stimulate the economy - those capital market rates are currently quite dynamic. For example, the interest rate on a ten-year Dutch government bond had risen to 2.1 percent in mid-June, while now - at the end of July - it is only 1.3 percent. Because of this high volatility of capital market interest rates, banks are still somewhat reluctant to adjust their mortgage rates. After all, things can quickly go the other way again.”

Despite the recent volatility, however, we can see that capital market rates have started an upward trend, driven in part by the sharp rise in inflation, Fokke emphasizes.

“Of course, it’s not out of the question that in the shorter term mortgage rates will also come back down. But if you compare the capital market rates of today with those of five or seven years ago, you can see that the trajectory of those rates is up, even though they have fallen sharply in recent weeks. In the recent six months, mortgage rates have risen along with this market movement.”


Emotional considerations
And this brings us to the key question: can a possible continuation of this rise in capital market interest rates that has been going on for years cause the air to be let out of the Dutch housing market bubble? After all, based on economic theory, you would expect that when financing becomes more expensive, the demand for houses falls - and so does the price. But with the housing market, it’s all just a bit more nuanced, says Fokke.

“The housing market is not driven purely by rational investment decisions. People who are looking for a house do not see it only as an investment object. In fact, emotional considerations often play a bigger role. This makes it relatively difficult to predict how such a market will develop. For example, I think many an analyst would have expected house prices to fall during Covid times because of the increased economic uncertainty - after all, they had already risen considerably. But the opposite turned out to be the case, and that illustrates the different character of this market. On top of that, although mortgage rates have risen, they are still not at a shockingly high level.”


Detached houses

Moreover, you can’t really speak of “the housing market”, and that too complicates the relationship between mortgage rates and the housing market.

“The housing market is not only fragmented regionally, but also in terms of housing type. All those different markets have their own dynamics of supply and demand. And of all the factors that determine the direction of the market, that dynamic is the most important factor. Many sub-markets show tightness, but the extent varies. For example, in the case of detached houses in the higher segment, supply and demand are reasonably in line. In contrast, the tension between supply and demand is much greater in cities, due to urbanization.”

Another reason why higher mortgage rates do not necessarily lead to falling house prices, according to Fokke, is several developments on the supply side of the housing market.


Rent increases curbed
“I am seeing at least two developments that are having a major impact on housing supply. The first development is that many investors are withdrawing from the housing market as a result of the increasingly strict regulation of the free sector. For example, initiatives have been taken to limit rent increases or to require that a buyer of a house first occupy it himself for a number of years before it can be rented out. The second development is the enormous increase in construction costs. Many materials - wood, steel and cement, for example - have become considerably more expensive, resulting in fewer building projects.”

The ECB can exert limited influence on mortgage rates through adjusting deposit rates. But the effect of that is dwarfed by the effect that changes in capital market rates have on mortgage rates. Capital market rates have risen since seven years ago and, more recently, so have mortgage rates. But even rising mortgage rates do not necessarily lead to lower house prices. So now that the ECB is raising interest rates, this will not automatically lead to a cooling of the Dutch housing market.

Volgende publicatie:
“Europe is going to have to live according to its means”

“Europe is going to have to live according to its means”

Published on: 25 July 2022

On July 11, 2022, Russian state-owned gas company Gazprom shut down the Nord Stream 1 pipeline for its annual ten-day maintenance. At the time, serious consideration was given to the possibility that gas supplies to Europe would not resume after the maintenance period - with all the potential consequences that would entail. What are those potential consequences? How big is the potential economic impact, if Nord Stream 1 were to be completely shut down? Five questions for APG’s Peter Verbaken, Head of Commodities Team, and Gillis Björk Danielsen, Senior Portfolio Manager Commodities. “The impact on the European economy will be the least if Europe responds in a coordinated manner.”


When Gazprom announced to its European customers in mid-July that it could no longer guarantee the supply of natural gas, serious consideration was given to the possibility that Nord Stream 1 would not be restarted. Those fears turned out to be unjustified, to the extent that natural gas began flowing through the pipeline again on July 21. But the supply was still at the same low level as before the maintenance: 30 to 40 percent of the natural gas quantity that Gazprom supplied to Europe through Nord Stream 1 until early June (a few days later, Gazprom announced that it would cut flows through Nord Stream 1 on July 27th, to 20 percent of its capacity). Before that date, the full capacity of Nord Stream 1 was used. Then the gas flow began to decline, and hovered around 40 percent of full capacity around June 17. And with that, it remains a means of pressure with which Russia’s president, Vladimir Putin, is trying to get Europe to stop supplying weapons to Ukraine and/or to reduce the economic sanctions imposed on Russia after the invasion of Ukraine. After all, Europe depends on Nord Stream 1 for a third of its natural gas consumption, and to get through the winter, it needs to replenish its gas supplies in the summer.


What could be the reason that Nord Stream 1 has been restarted after this maintenance period after all?

Björk Danielsen: “If Gazprom completely stops the supply of gas to Europe, it would mean a significant loss of revenue for the Russian state, because it cannot sell that kind of quantity elsewhere. Revenues they need to finance the war against Ukraine. You could speculate that restarting Nord Stream 1 may be a way for Putin to test Europe's resolve and internal solidarity. By maximizing the unpredictability of Russian natural gas supplies to Europe, Russia makes it difficult for Europe to remain united and plan ahead to meet its energy needs. The fact that Russia has resumed gas supply may be a way to dissuade Europe from taking emergency measures now to function without Russian gas in the winter. This is most likely to create divisions within Europe in due course. And that is in Putin’s interest.”


What would a divided Europe look like, if the natural gas supply from Russia were to stop completely?

“Some countries may make separate agreements to keep receiving gas from Russia. In other cases, it can be competition over who gets access to the limited non-Russian gas. Theoretically, a number of countries, including the Netherlands, can secure the necessary natural gas for themselves by stopping supplies to other countries. For example, some of the natural gas pumped into Groningen is currently supplied to Germany. But the chances that those countries will actually cut off supplies to neighboring countries are slim. Politically, it’s a pretty impossible scenario. When the possibility of a Russian supply freeze became more and more real, European member states made agreements to share their gas supplies and help countries disproportionately affected when necessary.”


What would be the economic impact on Europe, if Nord Stream 1 were to be shut down completely?

Verbaken: “The impact on the European economy will be the least if Europe reacts in a coordinated manner. Such a response is indeed expected. But it is far from certain, given the unequal interests of Germany in particular on one side and countries like Hungary, Spain, and Italy on the other. The IMF recently calculated that Europe can significantly limit the economic impact of a full Russian supply freeze with a coordinated approach. Should Europe still respond in a ‘fragmented’ manner, the extent of the economic damage will vary from country to country. For the Netherlands individually, it makes relatively little difference whether Europe responds in a coordinated or fragmented manner. If you look at the IMF figures, the percentages that the Netherlands gives up on gross national product are relatively close - around two percent at most in both cases. But countries that are much more dependent on Russian gas, such as Hungary, will be hit hard in a scenario in which Europe does not respond as one. The GNP of the Hungarians would take a hit of 2.5 to 6.5 percent in that case, compared to 1 to 3.4 percent in a coordinated European response.” 


For how long would the Netherlands be able to get by on its current gas reserves, if it no longer gets gas from Russia and no measures are taken?

Verbaken: “That is an irrelevant question, really, because you cannot consider the Netherlands an isolated country in that respect. Given that the European member states have agreed to share the natural gas reserves, it is better to ask: how long can Europe endure without Russian gas? And that is a very difficult question to answer because it depends on so many different factors. For example, how much the industrial demand for gas will decrease as a result of higher gas prices, and of course how cold - and how long - the winter will be in Europe. It also depends on how much LNG - natural gas that has been liquefied and can thus be shipped around the world - Europe can buy on the world market to make up for a shortage of natural gas.”


So, we just have to wait and see when central heating systems and gas stoves stop working?

Björk Danielsen: “Modeling does produce estimates of the time it will take for European gas supplies to be depleted if Russia stops supplying gas completely. But the bottom line is that Europe will have to live according to its means if the gas supply from Russia is cut off completely. Demand will simply have to be lower to get through the winter. That’s why the European Commission has also asked all member states to reduce their natural gas consumption by 15 percent between August 1, 2022 and March 31, 2023. How they do this is up to all member states. Part of the reduction will have to be achieved by governments and companies, but households may also be asked to make adjustments. The European Commission's proposal in its current form is unlikely to be passed – or even get to a vote – so most likely it will be amended. But we probably won’t be sitting at home with frostbite during the winter. Europe will not let it get that far.”


Volgende publicatie:
“Eventually, inflation in the Eurozone will move towards 2 percent again”

“Eventually, inflation in the Eurozone will move towards 2 percent again”

Published on: 22 July 2022

The war in Ukraine has made inflation a global issue in 2022. Including in the Eurozone, with Estonia taking the crown with inflation of more than 20 percent in June. But apart from African countries, there is no country where money has lost value as rapidly as in Turkey. Why is this, what does it mean for the Turkish population and how big is the chance that inflation in the Netherlands and Europe will get out of hand just as badly? We asked Charles Kalshoven, Senior Strategist at APG.


In June 2022, inflation in Turkey reached a staggering 78.6 percent, a figure that has not been this high for more than two decades. By comparison, in the same month, European inflation stood at 8.6 percent. The main reason for the extremely high figure in Turkey lies in the way the country is economically managed, says Kalshoven. This is because Turkey's president, Recep Tayyip Erdogan, holds unconventional macroeconomic theories.


“Turkish inflation has been able to get so out of hand because Erdogan somehow hates interest rates. It is hard to know why, but in fact he reasons as follows: when interest rates are high, companies have to incur a lot of costs - financing is expensive - and because these have to be passed on to their products, prices rise. So, he argues, if you want to keep inflation low, you have to keep interest rates low.”


Not good for their careers
In doing so, he goes directly against the consensus among economists and central bankers, which is that you need to raise interest rates precisely to keep inflation down. 

“And the central bankers in Turkey know that too, but raising interest rates has not proven to be good for their careers. Erdogan has already kicked out a number of bank presidents in the past for that reason.”

With the Turkish people’s money depreciating so rapidly, many are taking their money and investing it in assets that are more stable in value, Kalshoven says.


Gold and jewelry
“Many goods are currently being purchased in the hope that they will retain their value, such as gold and jewelry, as well as, for example, used cars. The economy may get a boost from this for a while - but it will be relatively short-lived. If everyone is primarily concerned with protecting their assets from inflation, it will ultimately not be that productive. Besides, it can also cause a negative, self-reinforcing effect. Turks are buying more foreign currency, which has caused the Turkish Lira to go down. Last year, the Lira was still worth a dime in euro cents. Now it is fast approaching a penny. This also makes imports more expensive for Turkey, which in turn creates imported inflation.”


The sharp rise in energy and food prices also plays a role in Turkey's inflation rate, but a relatively limited one. Kalshoven: “We also have these higher prices for energy and food in Europe, but here we still have single-digit inflation figures, while the Turkish economy has been showing double-digit inflation for some time now.”


Traumatic experiences
Before inflation in the Netherlands and Europe rises as high as in Turkey, a lot has to happen. After all, the interest rate policy of the European Central Bank (ECB) is diametrically opposed to Turkey’s policy and cannot just be swept off the table.


“The ECB does not have inflation on a string either, but there are solid agreements between the member states on the mandate,” he says. Christine Lagarde (the president of the ECB, ed.) can’t just be fired, that’s institutionally better guaranteed than in Turkey. Theoretically, you could exert influence through the appointment of an ECB president who pursues a distinctly specific interest rate policy. But in practice, countries like Italy, Germany and the Netherlands would have to agree on such an appointment. The Germans have had traumatic experiences with hyperinflation. So, the chances of them allowing it are very low.”


Far-reaching effects
The fact that the central bank in Turkey has still not raised its interest rates has - in addition to high inflation - even more far-reaching consequences economically. Confidence in the Turkish economy is declining, in more ways than one.

“In an attempt to keep prices in check, the Turkish government is resorting to short-term solutions. For example, it has reduced the VAT on food from 8 percent to 1 percent. It helps for a while but in the end, it is nothing more than a stopgap measure. It is not good for government finances and, as a result, financial markets' confidence in Turkish government bonds is falling. And the banking sector also benefits if the government's housekeeping is in order, because then it has easier access to foreign capital.”


No band-air solutions
Turkish consumer confidence has taken a hit and investment prospects are poor, says Kalshoven.


“Partly because the confidence level, which has fallen due to the counterproductive interest rate policy, encourages capital flight. Normally, a central bank would raise interest rates to combat that capital flight, but instead Erdogan blames the foreign interest lobby.


According to Kalshoven, the Turkish economy does not need band-aid solutions, but structural reform.


“The labor force in Turkey is growing, you want to keep those people employed. To achieve that, the country needs more exporting industry. The economy now relies too much on the construction sector and on tourism. And the latter sector is being hit hard, now that a significant proportion of tourists - Russians and Ukrainians - are staying away as a result of the war.”


The seventies

The (constitutional) situation is therefore fundamentally different in Europe and the Netherlands, and makes an interest rate policy like Turkey’s impossible. However, this does not mean that double-digit inflation is impossible in the Netherlands and Europe, says Kalshoven.


“In the 1070s, we saw that it can be done, but even then it wasn’t about percentages like Turkey’s now. And while interest rates in Europe may also be too low for current inflation, the ratio is not as skewed as in Turkey. Look, even with us there are conceivable circumstances in which inflation gets out of hand. Suppose we have a recession in which unemployment rises but inflation declines only slightly because there are mechanisms by which wages are automatically adjusted to prices - as was the case in the 1970s. The price you pay for fighting inflation - even higher unemployment - then gets really high. The call for less social damage will then certainly increase, although that is no guarantee that central banks will then cave in.” 


In any case, this scenario is not on the agenda at the moment, says Kalshoven, because the labor market is currently tight.


Not following Turkey
“And if interest rates are raised and there is a recession, that tightness will probably disappear again. The fact that we are not going to follow Turkey’s lead can also be seen from the ECB inflation forecast. In June, inflation was 8.6 percent, for the whole of this year the ECB expects 6.8 percent, for 2023 3.5 percent and 2.1 percent in 2024. Barring any surprises, such as escalation in Ukraine or new Covid lockdowns, we think that inflation in the Eurozone will eventually return to the 2 percent target. Incidentally, such a rate has not occurred in Turkey in the past 50 years.”

Volgende publicatie:
Are natural gas and nuclear energy sustainable?

Are natural gas and nuclear energy sustainable?

Published on: 21 July 2022

The use of natural gas and nuclear energy to generate electricity may be labeled as sustainable as of January 1, 2023. However, this will be temporary and subject to certain conditions, as provided in the so-called EU taxonomy Regulation. Johan Barnard, Head of International Public Affairs at APG, regrets the European Commission's decision. But in his new column, he calls for the taxonomy not immediately to be regarded as unworkable.  


The so-called EU Taxonomy Regulation is the basis for a catalog of economic activities that may be called sustainable by financial institutions under certain conditions. Previously, the European Commission had already proposed that electricity generation from natural gas and nuclear energy under this taxonomy regulation be temporarily labeled as sustainable. Implementing arrangements of this kind can be rejected by the European Council of Ministers or the European Parliament for a limited period of time, but do not require the explicit consent of the Council or Parliament. However, a resolution in the European Commission to block this proposal was voted down on July 6. Which makes the decision final.


The result is that from January 1, 2023, investments in natural gas-fired power plants that replace coal-fired power plants may be called sustainable under the EU taxonomy, as may investments in new or existing nuclear power plants, where for nuclear power plants the main limitation is that there is a strict requirement for the storage of the nuclear waste.


If you start looking at the conditions in detail, they differ in several ways from the criteria used for all other sustainable economic activities. At the same time, the practical options are quite limited, however. Member states that want to make investments in natural gas plants sustainable will have to close coal plants. As far as we know, Poland, for example, has no intention of doing so. And even if you are planning to think about new nuclear power plants, it is difficult to bring them under the sustainable category. This is because the new rules stipulate, among other things, that a Member State must then have achieved final disposal of highly radioactive waste by 2050. Dutch policy is to work with temporary storage and the plan for final disposal was not until 2130 at the latest. France does meet all the requirements of the new decree for nuclear energy.


It is important to recognize that early last year, and thus well before the war in the Ukraine, it was clear that the EU Member States had very different opinions on the question of to what extent and for how long nuclear energy and natural gas should continue to play a role. France, in particular, insisted that nuclear power did not produce CO2 emissions, while Germany was working to get out of nuclear power entirely. Because the number of countries joining France was quite small, France and the European Commission thought about broadening the issue to gain more support. This was achieved with the story that replacing coal with natural gas would be good, especially when natural gas plants will soon be made suitable for hydrogen. With this, the German position began to wobble and Eastern European member states were willing to go along with it in the direction of nuclear energy. It is conceivable that the Commission's proposal was intended to support President Macron, just before the recent presidential elections, for fear of a victory by one of the Euro-skeptic candidates.


A cynical view of the additional delegated regulation to the Taxonomy Regulation may therefore be that it is largely of political symbolic value. And that in itself is objectionable, even if the practical consequences are not that great. It is precisely this point that the Dutch pensions industry has stressed several times in the run-up to the decision. The sector understands that, in the context of the climate transition, intermediate steps may have to be taken, which enables an economic activity being first made less harmful than it is now, only to be made climate-neutral at a later stage. It would be a good idea to introduce an “amber” category for this purpose, but it is confusing to start calling those kinds of activities that are not yet fully sustainable sustainable. too. Especially since you know that within a few decades you have to get rid of them again.


The usefulness of a taxonomy that defines which economic activities can be considered sustainable, rests first of all on a solid scientific basis. But also on a broad acceptability to a large group of stakeholders of the final classification. Given the strong opposition from a wide range of NGOs and the division in the European Parliament (and really also between member states - more on this later), it is clear that the credibility of the taxonomy as an instrument has been damaged.


NGOs Greenpeace and ClientEarth are considering legal action against the EU. And Luxembourg and Austria have even already announced the start of such a procedure at the European Court of Justice. It will be positive if there is indeed a review by the European courts. In particular, the question seems important to me whether the Commission's additional delegated act has remained within the powers entrusted to it under the Taxonomy Regulation, or whether real legislation and thus positive decisions by the Council and Parliament would actually have been required here. Incidentally: this positive majority probably does not exist in the Council.


Meanwhile, it is important not to throw the baby (the taxonomy) out with the bathwater. Institutional investors such as Dutch pension funds and pension administrators continue to need an uncontested language to speak to stakeholders about sustainable investments. The additional delegated act prescribes that reports on sustainable investments must indicate separately which part of these sustainable investments relates to natural gas and nuclear energy. It therefore remains possible to look at reliable figures without natural gas and nuclear power.


And even more fundamentally, the taxonomy does not affect the investment freedom of institutional investors. If the taxonomy regulation considers an economic activity to be sustainable, an institutional investor need not invest in it. That makes sense because, of course, the classic considerations of risk, return, and cost still play a role. And in the case of natural gas and nuclear energy, that you can be of the opinion that the taxonomy regulation sets the bar too low. If an economic activity is not sustainable according to the taxonomy, an institutional may continue to invest in it. This is hardly surprising, given that the vast majority of the economy is not yet sustainable enough to meet the requirements of the taxonomy regulation. What is not allowed is to call something sustainable that is not, according to the taxonomy regulation. The expectation is that institutional investors and their clients themselves will steer towards sustainability, in addition to the aforementioned classic considerations of risk, return and cost.


I regret that this decision has come about. At the same time, it is fortunately not going to make a difference to institutional investors who want to divest from fossil fuels, including natural gas. The ugly element added to the taxonomy thanks to the Commission also need not get in the way of better dialogue with stakeholders. After all, it remains visible to what extent, if any, nuclear power and natural gas are hiding among the investments that are sustainable according to the taxonomy regulation. However, efforts should now be made to prevent this kind of political intervention in the taxonomy or only allow it with the explicit consent of the Council and Parliament.


Volgende publicatie:
Are taxes actually effective in the fight against climate change?

Are taxes actually effective in the fight against climate change?

Published on: 7 July 2022

Topical issues in the field of economy, (responsible) investment, pension and income: every week, one of APG's experts provides a clear answer to this week's question.

In this edition: Johan Barnard, Head International Public Affairs, on the question whether tax incentives are effective in the fight against climate change. “If the fuel prices stay at this high level for a prolonged period of time, people will start looking for ways to reduce the costs.”

In the beginning of July, the government announced that car drivers will pay more per kilometer driven starting 2030, instead of a fixed amount for owning a car - as currently is the case for the vehicle tax. It is one of the ways in which taxes can be utilized to encourage behavior leading to less CO2 emissions. And there are more buttons the government can push: the fuel taxes, the purchase tax (BPM), the vehicle tax, the maximum amount for an untaxed mileage allowance for employees and the fiscal addition for lease cars.

The question arises: how successful is that type of measures really?

According to Barnard that depends, among other things, on the price elasticity of demand: the degree to which the demand responds to a price change. “In case of elastic demand it responds to a large extent to a price change, in case of an inelastic demand that effect is relatively low. The latter applies to tobacco, for instance. For car fuels, the demand is also inelastic in the short term. Because oil is very expensive at the moment, the prices of petrol and diesel are also very high. Yet, this doesn't have a major effect on the number of cars on the road. But if the fuel prices stay at this high level for a prolonged period of time, people will start looking for ways to reduce the costs. For example by driving smaller, fuel-efficient cars or by getting rid of a second car. This means an increase of the taxes on fuel may therefore be an effective way in the long term to reduce the CO2 emissions.”

But the button of an increase of the fuel taxes also comes with some complications, Barnard says. For example, the border effects. “People in the border region can fuel their car in Belgium or Germany if its cheaper in those countries. There has been made an attempt once to eliminate that effect by means of a grant scheme for fuel station operators near the border. However, that attempt failed because it required more subsidy than allowed under the European state aid rules.”

Burning fingers
Moreover, most politicians don’t want to get their fingers burnt on an increase of the fuel taxes. “The government has now actually implemented a temporary decrease of the taxes. That is explicable in a political sense, but it does cause friction with the goals of the climate transition.”

The BPM – tax on the purchase of a new car or motorcycle – is also utilized as a means to reduce the emissions. No BPM is levied on electric cars, for example, and the BPM on a vehicle with a low emission level per kilometer is lower than on a vehicle with a higher emission level per kilometer. Yet, a decrease or abolition of the BPM could also be advantageous for the climate, Barnard says. “The advantage of a decrease or abolition of the BPM is that new cars will become cheaper, making it easier for people to switch to a more fuel-efficient car sooner. However, the downside is that the government in that case loses an instrument to encourage the purchase of electric cars, because the difference in BPM with fuel-driven cars no longer exists.”

Not stimulated
Barnard believes that, in addition to road pricing, other measures will be necessary. He outlines alternative possibilities that are targeting emission reduction utilizing a mixture of different existing fiscal instruments with a more focused approach.  “Only the vehicle tax is considered at the moment. That will be abolished and replaced with road pricing. But if it's really all about emission reduction, there are also possibilities to reach your goal through a combination of tax increases, a different fiscal treatment of lease cars and an increase of the maximum tax-free allowance for commuter traffic. The lease care driver is not stimulated right now to drive less kilometers. And this while the maximum allowance for commuting kilometers has not been sufficient for years already to cover the costs of that car use. Road pricing can be made more effective in a climate-related sense by levying less tax on kilometers driven with a clean car than on kilometers driven with a relatively polluting car. In addition, it can be used as an instrument to reduce traffic congestions by making road pricing per kilometer dependent on where and when those kilometers are driven.”

When it comes to emission reduction through taxes, the aviation industry and maritime sector cannot be ignored. Aviation kerosene, for example, is currently tax-free.  Barnard: “Agreements have been made in this respect in international treaties on which airlines rely. If you want to implement tax on kerosene, it entails at least European and possibly even broader international alignment. The large airports compete with one other and no country wants to put its own airports at a disadvantage relative to competitors. Should the EU countries agree to implement tax on kerosene, the airports in these countries will become vulnerable to competition from Heathrow Airport and Zurich Airport. That vulnerability mainly applies to an airport such as Schiphol that, the same as Heathrow and Zurich, has a business model based on a hub function between transatlantic flights and short-distance flights within Europe.”

Also an increase of the flight tax or VAT on tickets can contribute to emission reduction, Barnard says. “The flight tax would have to be increased to such an extent that a level playing field arises between airplane and train for certain distances. That is definitely not the case yet. For that matter, the government could also utilize a price increase for the landing rights at Schiphol. Schiphol is a public company after all.”

Privileged position
The same as the aviation industry, also the maritime sector enjoys a privileged position: the fuel, usually diesel, is untaxed. “The arguments for this are comparable with the reasons why airplane fuel is tax-free. But one element in maritime shipping is catching the eye in a negative sense. Because shore power is taxed, ships continue to run their diesel engines in the ports to provide for their power needs. As a result, the emission of one single cruise ship in the port of Rotterdam or Amsterdam is higher than the emission reduction realized in that same time slot due to the establishment of low-emission zones. This is like fighting a losing battle. In order to avoid those kinds of perverse effects, the fiscal exceptional position in the maritime sector also has to be addressed.

Summarized: taxes can be effective in the fight against climate change if all transport sectors are treated equally and provide targeted incentives through a mixture of fiscal instruments.

Volgende publicatie:
Are transfer passengers at Schiphol airport really that beneficial to the Dutch economy?

Are transfer passengers at Schiphol airport really that beneficial to the Dutch economy?

Published on: 23 June 2022

Topical issues in the field of economy, (responsible) investment, pension and income: every week, one of APG's experts provides a clear answer to this week's question. In this edition: Thijs Knaap, Chief Economist at APG, on the benefits of the much-discussed hub function of Schiphol airport for the Dutch economy.

Personnel shortages, long queues, the cancellation of flights. Schiphol airport has been a hot topic in the news again lately. An element of discussion here is whether or not the airport should fulfil a hub function. For a significant portion of the passengers, Schiphol airport is not their starting point or final destination but they only use the airport to transfer flights. In 2019 this involved more than one third of the 71 million passengers calling in at Schiphol airport. Are all of those transfer passengers really that beneficial to the Netherlands?

Network effect
According to Knaap, two elements are of importance. “The first element are the transport costs, meaning how much it costs to travel from the Netherlands to a foreign destination and vice versa. When a country has a large airport, such as the Netherlands has with Schiphol, the transport costs to that country are low because there's a bigger chance of direct flights and several airlines are competing with one another. Good accessibility is an advantage, economically speaking. The second element are the so-called network effects. That network effect enables a city or country to attract activities. If you are the first or most important company somewhere, the rest will come to you. There's not a lot to gain from the transfer passengers themselves, but the hub function does ensure that many airplanes travel through Schiphol, meaning we are well accessible as a country. Thanks to that network effect, more companies settle in the Netherlands providing more growth. If that's the goal, good connections are essential.”

It's difficult to say what the gain of such hub function is in a direct sense, Knaap says. “The few euros you earn for each transferring passenger will not make the difference. You could say that accessibility is the gain that eventually ends up with, for example, companies that benefit from it, with the Dutch holidaymaker who flies abroad easily and quickly and with the government by means of extra tax income. A part of that gain can be attributed to an increase of prosperity and that is difficult to measure. That also brings us to the point that the many flights from and to Schiphol airport also contribute to environmental pollution and noise nuisance. Those arguments are mainly presented when it comes to the transfer passengers at Schiphol airport, because they don't generate money for the Dutch economy. That's why many people ask themselves: ‘What is the actual usefulness of the hub function?’ But the goal is not the people transferring flights, the goal is the fact that the airplane flies to Amsterdam. The fact that an airplane departing from America or Asia arrives in Amsterdam is what makes the transport costs lower for the Netherlands and that's what it's all about.”

The considerations in favor of and against a hub function are changing over time though, Knaap says. “Thirty years ago, the general tenor was: ‘Let's build yet another landing strip’. The argument used in the past to make Schiphol airport grow, more employment opportunities, is less powerful since there are enough jobs available in the Netherlands. At the same time, we are currently dealing with housing shortages and more attention is paid to the environmental pollution and noise nuisance caused by Schiphol airport. That can also be seen in the debates where the general tenor now is: Just have Schiphol airport shrink.”

The millions of transfer passengers at Schiphol airport are therefore not directly beneficial to the Dutch economy. The hub function does ensure low transport costs and a possible network effect, advantages that are difficult to quantify. A balance between, on the one hand, the desire to maintain the hub function and, on the other hand, to decrease the number of flights, is difficult, according to Knaap. “You cannot say that by cancelling 50 percent of the flights, you will still have half of your hub. It would mean the hub no longer exists, because you need a minimum number of transfer flights. But it continues to be a guess how many flights would be needed to maintain the hub function.”

Volgende publicatie:
Thijs Knaap on BNR Newsradio about higher interest rates

Thijs Knaap on BNR Newradio about higher interest rates

Published on: 13 June 2022

On Thursday, the European Central Bank announced its first rate hike in 11 years. APG's Chief Economist Thijs Knaap spoke about it on Monday in the radio program BNR's Big Five.


The higher interest rate means in any case that the funding ratio of pension funds will rise. "That leaves more room to increase pensions," Thijs says in conversation with presenter Paul van Liempt. The question is whether this will be sufficient, because pensioners have to deal with rising prices. "The moment the funding ratio remains high long enough, the pension will also rise. Do rising prices and rising pensions cancel each other out altogether? If all goes well, yes, although it also depends on which pension fund you are with," says Thijs. He points out that the pension system is aimed at offering a good real pension, i.e. that the purchasing power of the pension is maintained as much as possible. "That system seems to be working, because we are now seeing the coverage ratios rise very quickly."


Compared to other major central banks, ECB President Christine Lagarde comes quite late with the announcement to raise interest rates. Thijs understands that caution. The economy is no longer the same as it was 11 years ago, "and you can't really know what the effect of the rate hike is until you do it. Then it is very wise to first raise the interest rate a little bit to see if it might have major consequences." Unlike the Federal Reserve, which is tasked with curbing inflation and combating possible unemployment, the ECB has only one explicit goal: to monitor price levels. Nevertheless, according to Knaap, they have a kind of shadow goal in Frankfurt, and that is not to cause too much damage to the economy when curbing inflation.

Listen to the entire broadcast here (Dutch). Also read ‘Five questions about the announced interest rate hike by the ECB’.


Volgende publicatie:
Five questions about the announced interest rate hike by the ECB

Five questions about the announced interest rate hike by the ECB

Published on: 10 June 2022

The European Central Bank (ECB) announced Thursday that it will raise interest rates next month. It is the first time in eleven years that this has happened. The aim is to curb high inflation. Five questions for APG's Chief Economist Thijs Knaap and Senior Strategist Charles Kalshoven.


Isn't the ECB a little late with this?

“In hindsight, certainly. Inflation has been way too high since last summer. Of course, it was not unreasonable for the ECB to initially estimate that inflation would fall again soon. A lot of inflation was related to startup problems after all the lockdowns. But yes, Ukraine has now been added, with a major impact on energy and food prices. There were also new lockdowns in a number of large production centers in China. It is clear that inflation will therefore remain high for longer. Other central banks have intervened before (such as the US and the UK) but you can argue that inflation in the Eurozone has so far been the result of external shocks, which the ECB cannot do much about.”


Why is the ECB taking the plunge now and not before?

“President Christine Lagarde herself previously indicated that the ECB would stop buying bonds in the third quarter. And that interest rate hikes would only come after that. To avoid unrest, the ECB wanted to be predictable and not to surprise the market. The disadvantage of this late intervention is that the interest rate will rise somewhat faster after this. Lagarde hinted that after a quarter of a percentage point hike in July, interest rates could rise by half a percentage point in September.”


Is there anything to say about how long it will take a rate hike to bring inflation back to the desired 2 percent?

“The ECB itself always talks about a pass-through of interest rate steps that is 'long and variable', one and a half to two years. But these are just the first steps now. Inflation is expected to remain high this year and next. The ECB itself thinks that inflation will be back at 2.1% in 2024. Market expectations based on traded inflation are somewhat above that. Where we arrive with the interest rate when inflation is stable is known among economists as the neutral rate. In a recent message on the ECB's website, Lagarde indicates that she expects the ECB to move slowly towards this neutral rate. But at the same time she indicates that no one knows exactly how high this interest is. So there is not much to say about it.”


Is this hold enough to bring inflation back?

“It will take a little more than just the announced interest rate steps of July and September. The ECB itself is also talking about the start of a process. It is true that the ECB can get help from a number of quarters. A recession would depress wages and energy prices. More pleasant – and less likely – would be: relaxation in the oil market due to rapid peace in Ukraine. Another possibility is that governments will interfere with prices. Think of subsidies or maximum prices. That is quite disruptive economically, so let's hope these weapons are not used too much. Ultimately, you also need some time to work inflation out of your system.”


It is the ECB's first rate hike in 11 years. How unique is this?

“Especially what you see in the rear-view mirror is unique. We have had ten years in which the ECB interest rate was zero or negative. The latter was not possible at all according to the economic textbooks. Mario Draghi was president of the ECB for eight years but never raised interest rates. His successor probably does. We're finally going back to normal. Borrowing money will cost money again, storing money will pay off again.”

Volgende publicatie:
What will we notice in the Netherlands of the discontinued gas supplies by Russia?

What will we notice in the Netherlands of the discontinued gas supplies by Russia?

Published on: 9 June 2022

Current issues in the field of economics, (responsible) investments, pension, and income: an APG expert gives a clear answer to the question of the week. This time: Marco van Eijkelenburg, Senior Portfolio Manager Commodities, on the question what the Netherlands will notice of Russian Gazprom discontinuing gas supplies to Dutch GasTerra.


The reason that the Russian state-owned gas company no longer delivers to the Dutch gas distributor as of June 1st is that it does not want to pay the bill in Rubles, something that President Putin is demanding. Poland, Bulgaria, and Finland have already been confronted with the Russian sanction. According to Environment Minister Rob Jetten, the decision by Gazprom will not have consequences for Dutch households. But not everyone is convinced of this. Mijnraad, an independent advisory body of the government warned that a gas shortage could have “very large social consequences”  The international energy agency IEA also warns for an energy ration.


Marco van Eijkelenburg points out that GasTerra already has alternatives for the Russian gas. “I therefore do not think that this action by Gazprom will have major consequences for the Dutch gas reserve, although GasTerra will have to pay more for those alternatives than for the Russian gas. With its gas roundabout [infrastructure interchange for transport and storage of natural gas], the Netherlands has a favorable position with respect to the gas supply. As a direct consequence of the Russian invasion in Ukraine, there will be an accelerated scale up of capacity to import liquid natural gas (LNG). Gasunie, the state-owned company that takes care of the Dutch natural gas transport has rented two floating LNG facilities to expand the new LNG terminal at Eemshaven.”

This terminal, with an annual capacity of 8 billion cubic meter, will become an important supply line, Van Eijkelenburg explains. “We use approximately 40 billion cubic meter natural gas in the Netherlands per year, of which approximately 15% comes from Russia. If needed, there is always the gas field below Groningen, although that is politically sensitive. If there is a shortage of gas this coming winter, the government will first disconnect large industrial users from gas so that the delivery certainty for households and specific essential social services, such as hospitals, can be guaranteed. So, the Dutch consumer does not have to worry about the delivery certainty; it does however have to worry about the gas price. Especially when there is a variable contract and a cold winter.”

That uncertainty about future gas deliveries can already be felt in the price

However, that higher price is not specifically caused by Gazprom discontinuing its delivery to GasTerra, Van Eijkelenburg emphasizes. “The increased gas costs have more to do with the fact that the entire gas supply from Russia is decreasing, partly because European countries want to move away from Russian gas, and partly because Russia is demanding payments in Rubles. The developments surrounding GasTerra and Gazprom are therefore part of a wider trend that is happening, and that brings along a lot of uncertainty. And that uncertainty about future gas deliveries can already be felt in the price. Directly in the gas price, as well as indirectly in the prices of goods. If the situation in Ukraine escalates further, with all the associated consequences for the Russian gas deliveries to Europe, the gas price can increase even more.  But it is also possible that Gazprom will discontinue even more deliveries, but that there is a price decrease after all. Simply because the current price already accounts for a negative future scenario.”


Gas supply
So the relatively high price we currently pay for gas is partly because the future uncertainty is already included in the price. What is striking is that the Dutch gas reserves are filled less than 40 percent. The government wants to replenish this to 70 percent, but the Mijnraad advises to do this to 100 percent. According to Van Eijkelenburg it is indeed wise to replenish the Dutch gas reserves as much as possible in the coming months before winter starts. “You have to take into account the worst possible scenario where more Russian gas supplies to Europe are discontinued in the short term and that we will have a cold winter. If you have the option now to best prepare yourself for this, you should do that. Europe will only import less Russian gas in the coming years, so the extra natural gas that was purchased will come in handy.”

We should regard Gazprom’s discontinued gas delivery to GasTerra as a small step in the larger movement to move away from Russian gas. “By definition, such a sudden boycott is a disruptive process and will never be gradual. Because of this, the predictability of supply and demand will decrease, and the prices will increase because of the increased uncertainty. But the delivery of gas to consumers will not be compromised, partly because of the increased expansion of the Dutch capacity to import liquid natural gas.”


Volgende publicatie:
How does the more expensive dollar affect Dutch consumers?

How does the more expensive dollar affect Dutch consumers?

Published on: 25 May 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert provides a clear answer to the question of the week. This time: Thijs Knaap, chief economist at APG, talks about the consequences of the strong dollar for Dutch consumers.

At the start of 2021, one euro would fetch 1.22 dollars. At the beginning of this year, it was still 1.14 dollars and now the exchange rate of the euro has fallen to around 1.07. This means the euro is still worth a little more than the U.S. currency, but the difference is pretty small. Just after the introduction of the euro, at the beginning of this century, was the last time that the dollar was stronger than the European currency. At that time, you’d get a paltry 83 cents for your euro. Around the credit crisis of 2008, however, the euro was very strong again and was worth 1.60 dollars. So, the exchange rate fluctuates considerably. What factors play a role in this? And what does the Dutch consumer notice about the more expensive dollar?

More expensive vacations

With an exchange rate, three things come into play, Knaap explains. “Dutch consumers immediately experience the first one. That is because American products that you have to pay for in dollars, for example on the internet, become more expensive. Vacations to America also become pricier.” In addition, there is an indirect consequence. “Very generally, you can say that there are two large economic blocs that compete in the world market: America and Europe. Our power as Europe to buy products such as gasoline on the world market at a competitive price, for example, depends very much on what the euro is worth against the dollar. Now that the euro is weaker, we have to bid against the stronger dollar on the world market. That leads to products currently becoming more expensive for us than for Americans.”


The second force that plays a role in the exchange rate is the financial markets. “There is always a need to put excess money away somewhere in the world, for example in a bank or by buying a government bond. Then it matters what the interest rate is, and it is now quite high in America and quite low in Europe. So, it is more attractive to put money away in America, which increases the demand for dollars and makes that currency more expensive. The current high interest rate in the US is therefore the biggest reason for the strong dollar. Because although the global flows of goods are big, the financial flows are even bigger. These therefore have the greatest impact on the dollar exchange rate. If the European Central Bank were to raise interest rates now, the euro would become somewhat stronger, but that does not have a one-to-one effect. Financial markets also take into account expectations about the U.S. and European economies. The European economy is somewhat weaker, for example due to the war in Ukraine. The rise in US interest rates will therefore be stronger than in the eurozone.”  

Next year the dollar may even be stronger than it is now

Safe haven

The fact that the dollar is still seen as a safe haven is the third factor influencing the exchange rate. “Anytime there is a calamity somewhere in the world, like right now the war in Ukraine, investors get scared and take their money to the U.S. and buy dollars. They do so because they have learned through trial and error that at the time of misfortune, the dollar rises in value. There is some debate as to whether the US really is that safe for investors anymore. Think of the period under President Trump, for example. But for now, Washington has nothing to worry about. Just look at the beginning of this year: Russia invades a country and boom, all the money goes to the US.”


There is also a reason to be happy with a cheap currency. After all, European products are now cheaper on the world market and will therefore be sold more, which in turn can lead to more employment, for example. In that sense, Europeans can benefit indirectly from a cheap European currency. This also applies to the Netherlands, although additional employment can currently also lead to a further tightening of the labor market. “Despite the fact that a large part of our exports remain within the euro zone, trade with non-euro countries still plays a major role in the Dutch economy. A cheap euro is therefore not only good for exports of German and French cars or Italian fashion, but also for Dutch exporters.”


Long term

So, possibly extra jobs for the Netherlands, but also more expensive American products and vacations. Those prices will only go down again when the exchange rate of the euro rises. What is needed for that? “In the short term, a higher interest rate,” Knaap says. “In the long run, it will work itself out: the cheaper euro will lead to so much trade that demand for euros will increase and demand for dollars will decrease. An end to the war in Ukraine will also make for a stronger euro.” For now, the U.S. currency will remain strong, Knaap expects. “In the US, they’re really raising interest rates, which will further shore up the dollar. I would venture to say that the dollar will be a lot weaker in five years, but next year it may well be stronger than it is now.” So, for the time being, American products and vacations will remain relatively expensive for Dutch consumers.

Volgende publicatie:
Are We Right to Be Scared of a Recession?

Are We Right to Be Scared of a Recession?

Published on: 12 May 2022

Current topics with regard to the economy, investment (responsible investment in particular), pensions, and income: Every week, an expert at APG provides a clear answer to the “Question of the week”. This time, macroeconomist and senior strategist Charles Kalshoven explains whether we’re right to be scared of a recession.


Although the economy rapidly recovered immediately after the pandemic, the current outlook for the global economy is worsening once again. The war in Ukraine and a new wave of COVID-19 in China, which has caused another partial lockdown of the country’s economy, are weighing on growth. Disrupted supply chains for energy and machine parts—or fears of disruption—are further pushing up prices. And inflation was sky-high even before all this. Central banks are now fast-tracking measures and, one after the other, raising interest rates. But won’t that put us into recession? Is the fear of a period of economic downturn—with the risk of more bankruptcies, higher unemployment, and falling tax revenues—the reason for the current stock market plunge?


“Almost every recession is preceded by a bad stock market performance. But this doesn’t work in reverse. Not every bear market, meaning a 20% decline in stock prices, is followed by a recession. It’s often a false alarm,” argues Kalshoven. “If you look at companies’ recent profit figures, they’re reasonably as expected. It’s also not the case that analysts have become more negative about next year’s profits. So, these factors don’t necessarily point towards a recession. Interest rates are the more likely cause of falling stock market prices. When interest rates rise, the present value of future profits falls. This in turn translates into lower stock market prices. A degree of uncertainty plays a role in this value, such as how exactly the tightening of monetary policy will affect the economy. Will we manage to contain inflation without causing excessive collateral damage to growth? The Bank of England, for example, has already warned that the British economy will enter recession later this year.”

A normal recession is needed to ‘cleanse’ the economy of excesses, but that’s not the case now

Economic Shock
“There are enough other sources of uncertainty, whether about the developments themselves—the war in Ukraine or fresh lockdowns in fall—or their impact. The past years have been so eventful that we can’t really know for sure whether historic relations are still relevant. We’re coming out of the pandemic, which delivered an unparalleled economic shock. The response from central banks and governments, pulling out all the stops to bear the brunt of the impact, was unprecedented. The end of the pandemic led to a sudden recovery in demand. The pandemic had also caused gaps in the labor market, with people quitting their jobs en masse, leading to the current staff shortages. That’s another economic shock we’re having to deal with. And here, in the West, we’ve identified new Omicron variants from South Africa. Although these variants appear to be milder than previous ones, there are still many uncertainties. Predicting the future has always been a tricky business; that applies now more than ever. So, it’s hard to say whether there will be a recession.”


Until recently, all economic indicators were positive. Does this mean that the consequences of a possible recession might not be so bad? “It won’t be a textbook recession, which is a result of economic overheating. A period of optimism eventually leads to excessive credit growth, which destabilizes house prices and stock market prices. If wages and prices grow too rapidly, central banks intervene by raising interest rates. But this isn’t a classic case of excesses. The pandemic meant consumers were unable to spend their money and instead accumulated a large stock of savings. There was also a huge degree of government support that kept companies afloat. And while the current mass staff shortages are driving up wages, the cause lies elsewhere. The pandemic shut down entire sectors of the economy, causing staff to get up and leave. A sudden swing in demand, from zero to full throttle, will doubtless create problems. The situation will resolve itself, possibly through higher wages, but that doesn’t mean it’s a classic wage-price spiral. A normal recession is needed to ‘cleanse’ the economy of excesses, but that’s not the case now. With that in mind, I don’t expect a drawn-out, exasperating recession—if there even is one.”

Volgende publicatie:
Thijs Knaap at BNR about a changing economic regime

Thijs Knaap at BNR about a changing economic regime

Published on: 11 May 2022

“Right now there is an economic regime change going on.” That is what APG's Thijs Knaap says in the business program Zakendoen on BNR Nieuwsradio, in response to the falling share prices of so-called 'corona winners' such as streaming services, meal deliverers and now also postal and parcel deliverer PostNL. “A company that does well in one economic regime, does poorly in another. That's not so strange. The question that you then have as an investor is whether all companies are doing badly. How is the average? And to my great relief I can see that the average is actually going quite well.”

Knaap, chief economist at APG, regularly joins the investor panel of Zakendoen. In Tuesday's broadcast, he also discusses the continuing turmoil in the financial markets as a result of the Federal Reserve's rate hike. “The Fed and the other central banks now have only one goal and that is to stop inflation as quickly as possible. So the rescue for the stock market is not going to come from them.” Meanwhile, gloomy clouds are looming on the economic horizon, in the form of the ongoing war in Ukraine and lockdowns in China. “That could just lead to things slowing down quite quickly, and then there is the risk that the central banks that are slowing down the economy will do so in a situation where the economy itself is actually slowing down.” With the danger that the economy will be slowed down too much. “And when that happens you have a recession and investors don't like that at all,” said Knaap in conversation with presenter Thomas van Zijl and Martijn Rozemuller, Head of Europe at VanEck.

Listen to the entire broadcast (Dutch) here.

Volgende publicatie:
What causes the rise in the coverage ratio?

What causes the rise in the coverage ratio?

Published on: 20 April 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Chief Economist Thijs Knaap talks about the pension funds’ rising coverage ratios.

Many pension funds had good news on Thursday: their coverage ratio - which reflects the financial position of a fund - has risen in the past quarter. The actuarial interest rate is used to determine whether a fund’s current assets are sufficient to pay out pensions (the so-called liabilities) (in the future). The higher the interest rate, the less capital a fund needs to have and the higher the coverage ratio. It’s like saving for a vacation: the higher the interest, the less you have to put aside each month. Based on the coverage ratio, a pension fund decides whether to increase pensions. This is therefore an important percentage.

“It’s a bad economic time,” Knaap says. “There is a war in Ukraine, and there is a scarcity of personnel and goods because the economy suddenly started to run at full speed after Covid. On top of that, China is in lockdown after the last Covid outbreak there. This creates additional scarcity. The fact that the economy took a hit due to these factors is also reflected in pension fund returns for the past quarter. For example, the bond and share portfolios showed losses of around 5 to 6 percent. You don’t want to have quarters like that too often. In the past, there were quarters in which shares fell by 20 percent, but then you often had bonds that actually increased in value.”

Now the value of all investments is falling, with the exception of so-called alternatives such as commodities, private equity and infrastructure. “But you can’t make it with just good returns on those. Many funds are having negative returns and that has repercussions for their assets: they are falling. But the funny thing is that the coverage ratio is not only based on the assets of a pension fund, but also on the liabilities. This amount is calculated using interest rates and these are now rising so quickly that money is growing faster and less needs to be put aside by the funds to pay pensions. In other words, the liabilities are falling, so the coverage ratio is rising and has even reached a level that we haven’t seen in some funds since 2008, just before the credit crisis. What is going on with the funding ratio right now is quite curious: negative returns but a higher funding ratio. That’s exactly the opposite from the one we saw over the past decade. In those years, pension funds achieved excellent returns but their funding ratios fell. However high the returns were, the liabilities rose even more sharply as a result of the falling interest rates.”

It is still far too early to say that we have definitively reached the end of the ever-decreasing interest rate

The current higher funding ratios are due to increased interest rates. That raises the question of how long interest rates will remain high. "Since the 1980s, the credibility of central banks and their policies to curb inflation have become increasingly reliable. Now inflation is rising and the European Central Bank is still not doing anything, so there is a chance that the credibility of central banks will decline again. That could mean permanently higher interest rates because investors want to be compensated for the risk if inflation peaks again in the future."

However, there are also reasons to believe that interest rates will eventually fall again. “Right now, there is a lot of savings, both in the West among baby boomers, for example, and in emerging economies like China.” That pushes down interest rates, and the factors underlying the surplus of (savings) money still exist. “Although you can point to a few that are turning around a bit, such as low inflation expectations. Another one is the Chinese supply shock. Items from China, like TVs and cell phones kept getting cheaper and cheaper. Since Covid, the West has wanted to become less dependent on Chinese production. This could lead to less import of cheap products from China. Low-wage countries also want to earn more from their products, which therefore become more expensive. Moreover, China will also want to start spending more. The same can be said of the Western baby boomers, who are now retired. The supply and demand for money will then come more into balance, which could possibly reverse the trend of falling interest rates. But in my view, it is still far too early to say that we have definitively reached the end of the ever-decreasing interest rate.”

Volgende publicatie:
Can housing be made affordable again?

Can housing be made affordable again?

Published on: 14 April 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Head of European real estate Robert-Jan Foortse talks about the question of whether housing can be made affordable again.

New homes threaten to become unaffordable for many people, warns the Home Owners Association (VEH) on Monday. The same day, the government says it wants to do something about the steep rise in rents in the free sector. The question arises whether housing can be made affordable again, and how. According to Foortse, there is only one solution, and that is to build more homes. A lot of homes. 

Rental Rates
“I think the solution is a bigger housing supply. Other measures may be counterproductive. One example of a counterproductive measure is limiting rent increases. After all, if rents are no longer allowed to rise, why would investors invest in Dutch homes? One consequence may be that large investors invest their capital in the housing market of the countries around us, where often the same problems apply as in the Netherlands. After all, part of the problem is partly the result of the monetary and fiscal policy pursued in recent years.”

When it comes to rental housing, corporations also play a role. “They could divest part of their rental housing in the free sector to institutional investors in order to focus entirely on social rental housing.” Foortse does not think that will send rental rates in the free sector through the roof. “Institutional investors generally invest in residential properties because they have a fairly low investment risk and are therefore a stable part of their portfolio. Residential investments have a somewhat lower return but if the rent increases are around the inflation level, I think it works well for investors. For this year, the largest Dutch investors, in consultation with IVBN and the Ministry of the Interior, have decided to limit the rent increase to 3.3%, despite higher inflation. A limited rent increase reduces competition because it makes private equity firms, which want to increase rent as much as possible in a short period of time, lose interest. Thus, you reduce the stress on the market and prices do not go through the roof. Long-term investors benefit most from a stable, predictable housing market.”

Investors are also looking at accessibility for housing in the large cities for workers such as teachers and medical staff

New buildings
The Dutch housing market now consists of 57 percent owner-occupied housing and 43 percent rental housing. Investments for new rental homes will have to come partly from investors, but the money for owner-occupied homes will have to be raised by private buyers. “Newly built homes are now in the 300 to 500,000s, but that is a price that few people can afford anymore, according to VEH. The question is how to build houses in the 200 to 250,000 range. They will either be much smaller than the current new construction, or they will be in places that are less desirable,” Foortse says. There are two major components in the price structure of a house that make it difficult to build much cheaper. “There are the construction and material costs, which are rising by the day due to high inflation, and there is the price of the site. That is often calculated by municipalities. It is difficult for them to offer the site cheaper, because then they are left with a hole in their budget and can no longer finance other projects.”

Last month, Housing Minister Hugo de Jonge did indicate that he can intervene with a so-called “designation” with local authorities to enable additional residential construction. To date, such a designation has rarely been used, and not without reason, Foortse believes. “That is considered a draconian measure in the Netherlands, because you touch the hierarchy that we have in this country with a national, provincial and municipal government. I understand that the cabinet wants to coordinate the solution to this problem centrally, but I can also understand if there is local resistance to new constructions projects here and there.

Finally, according to Foortse, the construction of new homes is not only hindered by the sharp increase in land and material costs, but also by the strict(er) laws and regulations regarding sustainability. Examples are regulations on insulation, on the disconnection of gas networks and on emissions of CO2 and nitrogen. "This limits the possibilities to designate new housing locations and often leads to higher construction costs. Institutional investors also have the task of investing heavily to make the existing housing portfolios more sustainable. The latter does contribute to lower energy costs for tenants."

There are several sides to the concept of affordability, Foortse explains. “For example, you can ask yourself for whom new construction should be affordable. If new houses are built for around 450,000, we can at least ensure that anyone currently living in a house valued at 200-300,000 could upgrade to a new house. This will create more supply in the lower segment for first-time buyers. In recent years, the supply in the 450,000-range lagged behind, which prevented people from advancing in the housing market. After all, if there are no better-quality new homes, why move? Traditionally, a person moves from a single to a double household and eventually to a family home. People generally look for more space in their next home.”

Building more is thus the long-term solution. There are, however, a number of concerns that Foortse believes should be taken into account. One is to ensure that the government does not scare off large investors by limiting rent increases. As far as new construction is concerned, consideration must be given to whom it is being built for: for those moving up to the higher segment or for first-time buyers. And in the case of new construction, it will be a balancing act for the government to remove any local resistance to new construction projects. "In the shorter term, we can investigate whether we could make better use of the existing housing stock, as was recently suggested by some economists. This could be done by further stimulating cohabitation, or at least not making it more financially unattractive. The number of single-person households has been rising for years. For the affordability of the housing market, it would be good if that trend could be stopped. In addition to affordability, institutional investors are also looking at accessibility for housing in the large(r) cities for so-called 'key workers', such as teachers and medical staff. This can be done by introducing priority arrangements."

Volgende publicatie:
What if the EU starts boycotting oil and gas from Russia?

What if the EU starts boycotting oil and gas from Russia?

Published on: 7 April 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Peter Verbaken, Head of APG's Commodities Team, talks about the consequences of a boycott of Russian energy.


A gas and oil boycott is not part of the latest sanctions package against Russia, but it is a measure the EU is holding in reserve. According to a report by the Netherlands Bureau for Economic Policy Analysis, the Netherlands will be hit hard if Brussels imposes such a ban. Should we therefore be afraid of such a boycott? Or will the consequences not be as bad as expected, as professor of economics Sweder van Wijnbergen argues in de Volkskrant?

First of all, Verbaken says that the situation in Ukraine affects him. “It is terrible to see how the people of Ukraine are suffering from the violence of war and how the country seems to be slowly being devastated. I've been following it closely from the start, also partly because of the impact it has on my work, and I sincerely hope it ends soon."

Coal as an alternative
Because of Europe’s heavy dependence on Russian gas, a gas boycott will hit harder than an oil boycott, Verbaken argues. “In the Netherlands, we have been lucky with a mild winter. At the end of last year, even before the Russian invasion of Ukraine, there was already a huge increase in the price of gas because stocks were so low. The mild winter and an increase in Russian gas supplies enabled us to get through the winter. But now we need to replenish gas supplies in the summer. If a ban on Russian gas imports does not allow us to replenish stocks in time, an alternative plan will be needed. Van Wijnbergen mentions the use of coal as a solution. In theory, that is indeed possible, although it is, of course, contrary to current climate policy. But it cannot be ruled out that politicians might nevertheless decide to switch from gas to coal in this exceptional situation.”

The question is whether coal can make up for the loss of Russian gas. Verbaken does not think so. “In practice it will turn out that you also have to do something on the demand side. For example, there is already a government campaign called ‘Turn the Switch’, which aims to get households to turn the thermostat a degree lower. However, a third of the gas demand in the Netherlands comes from industry. In order to reduce this demand, it cannot be ruled out that large industrial gas consumers will be forced to use less gas. This is certainly conceivable if Dutch gas reserves are not to be topped up with Russian gas this summer. However, forcing industry to use less gas is a radical measure of the kind we haven't seen since the 1970s, with the oil crisis and car-free Sundays.”

The concerns about the impact of a boycott of Russian gas and oil are certainly justified

Oil shortage
In the case of oil, it is a slightly different story. Should the EU no longer import oil from Russia, then China and India will buy up the Russian oil at steep discounts, Van Wijnbergen expects. As a result, both Asian powers will need to import less non-Russian oil from the world market and therefore there will be no oil shortage. In theory, Van Wijnbergen has a point, but in practice things may turn out more difficult, Verbaken believes. “It will certainly take Europe several months to switch from Russia to other oil suppliers. In addition, the West is putting pressure on China and India not to play Russia’s savior, especially after the latest news about the many civilian deaths in Ukraine. What also comes into play are the so-called letters of credit, the financing required to ship oil. Financial parties will be very cautious about issuing them due to the threat of sanctions and public opinion.” It therefore seems unlikely in the short term that an oil shortage can be avoided by China and India importing more Russian oil, leaving more non-Russian oil for the EU countries.    


Major interventions
Verbaken thinks that Van Wijnbergen’s view is a bit on the optimistic side when it comes to the consequences of the removal of Russian energy. “Among other things, he is missing the factors that make shifting oil flows complex, and that gas demand really needs to come down.” Most problematic remains the boycott of gas. “The elimination of Russian gas punches a hole in our supply. If it can't be replenished in the summer, the problem will become more and more critical,” Verbaken says. “It’s like driving towards a cliff. The gas supply can only be sufficiently replenished if sufficient coal-fired power stations can be started up, the demand for gas can be reduced, and the supply of LNG (liquefied natural gas) can be tapped here and there. At the moment all that is being asked of the population is to use gas more sparingly, but what if that proves insufficient? How far do you have to go to force industries to use less gas? And which industries do you start with? The crux of this situation is that the government cannot explain to the population that they will not be able to heat their homes next winter. Major interventions are needed to prevent that from happening. The concerns about the impact of a boycott of Russian gas and oil are therefore certainly justified as far as I am concerned. However, given the current situation, with all the suffering that Moscow causes, it would be a perfectly justifiable sanction against Russia. If it is actually implemented, the government, industry and the Dutch population will have to work hard together to minimize its impact on us.”   

Volgende publicatie:
Is the Dutch shopping street making a comeback?

Is the Dutch shopping street making a comeback?

Published on: 30 March 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Head of European real estate Robert-Jan Foortse, about the future of the Dutch shopping street. “In the past, people mainly went there to buy things. Today, consumers want more.”

In the first year after opening, the Mall of the Netherlands, a shopping center in Leidschendam-Voorburg, attracted 13 million visitors, despite two lockdowns. That was more than expected. This tells us that big shopping malls seem to be faring well, but the Dutch shopping street, on the other hand, is struggling, and has been for some time, Foortse says. “Although it does make a difference whether you are talking about the Kalverstraat in Amsterdam or a shopping street in the somewhat smaller provincial town. The trend from physical to digital sales has been going on for a number of years, and Covid has accelerated that trend.” Still, Foortse sees opportunities for the shopping street, although it will require a transformation.


Investing in shopping streets to help them get back on their feet is not so easy. “The problem with shopping streets is that ownership is extremely fragmented. It is therefore very difficult to create a proposition for a shopping street because there are so many stakeholders and owners. For example, one owner may want to invest in his own property but not in the infrastructure, while another may not want to invest at all. Because of this fragmentation, APG, about fifteen years ago, chose to invest primarily in shopping malls and outlets, such as, for example, Batavia Stad Fashion Outlet. This is actually a replica of a Dutch shopping street. Because we have full ownership, this shopping street can be managed and controlled in the same way as a shopping mall. We have influence on the range of stores, the parking facilities and whether it is safe and well maintained. We don’t have that influence in an ordinary shopping street. Visitors in Batavia Stad notice that it is a pleasant environment for shopping, although the outlet discounts also play a role, of course.” 


Because the traditional shopping street has so many stakeholders with different interests, it takes a long time to find a new use for it, says Foortse. “This is primarily a problem that, in my opinion, lends itself to a public-private partnership. The various stakeholders must come together and design a joint vision of the shopping street of the future.” Because the function is changing. “In the past, people used to go there mainly to buy things. Today, consumers want more. I think people still want to go to the shopping street, but it’s more to buy something tasty from the deli or to visit a pop-up store. You have to create something that appeals to people, and that is no longer just offering items to buy. Experience may be a word that is being overused, but it really is about that. Post-Covid, we are once again noticing that people are social beings after all and like to go somewhere where there are other people.”

A transformation of the shopping street is afoot, but it is happening slowly


Of all purchases, about 75 percent are still made in physical stores. The remaining 25 percent is done digitally; a percentage that will only get higher. The average shopping street of the near future will therefore need fewer square meters of retail space. “The shopping street still has quite a few qualities to offer, but we may have to reinvent it and find a new approach. One of those qualities is that they are often centrally located in a town. Also, there is often parking nearby. If flexible working becomes a permanent part of our lives, retail space can be converted into workplaces. People who don’t have a suitable workspace at home will then be able to go there, but they will still not want to have to deal with traffic jams to the office outside the city.” The location in the city center and the parking facilities also argue in favor of converting stores into homes, Foortse believes. “But it can easily take several years to get the zoning changed. That does take away the incentive to create something new in a shopping street. That’s where I see a role for politicians. They should ensure that this process can be accelerated.”  


It appears that the Dutch shopping street will be able to make a new start, but it will look very different in ten or twenty years than it does today, Foortse believes. “I think you’ll see much more of a mix of today’s traditional stores, places to eat and drink, offices where you can rent workplaces and residential spaces. That will be true for all cities, although there will be differences in emphasis. For example, Amsterdam’s Kalverstraat will remain primarily a shopping street while the shopping street in a smaller town will include more housing. A transformation of the shopping street is afoot, but it is happening slowly.”

Volgende publicatie:
What happens when a country goes bankrupt?

What happens when a country goes bankrupt?

Published on: 25 March 2022

Topical issues in the field of economy, (responsible) investment, pension and income: every week, one of APG's experts provides a clear answer to this week's question.


In this edition: Sjacco Schouten, Head of Emerging Market Debt, about the consequences when a country such as Russia is no longer able to fulfil its payment obligations. “Also in an economic sense, it is a scenario with only losers.”


In the beginning of March, a number of credit rating agencies expressed the expectation that Russia would possibly no longer be able in the short term to fulfil its payment obligations (interest and redemption of the national debt) due to the Western sanctions. Russian government bonds were given a so-called ‘junk’ status, which more or less means that creditors deem it very likely that a large part of their money will not be repaid. This raises the question what happens to a country in case of such ‘bankruptcy’. In what case is this applicable? And what are the consequences?


The first question appears to be relatively easy to answer. Schouten: “The interest payment and redemption of government bonds usually takes place on pre-established dates. If a country misses such date, a grace period takes effect first during which the country is given the opportunity to still make the payment. When that doesn't happen, the country officially goes in default.


Virtually zero

The answer to the second question – about the consequences of such default – is much more complicated as it entails quite some ifs and buts.


“When a country is officially in default, all kinds of processes are activated. A government will usually propose a restructuring to the bondholders and make agreements on ‘how to continue’. These agreements depend on the conditions of the bond and the legislation of the country where the bonds are issued. In the most extreme case, when a country is truly unwilling or unable to pay, the bondholders are possibly forced to fully write off their bonds, to virtually zero. The price will not be entirely zero, because you can never rule out for a hundred percent that some money will still be repaid at a certain time.”


Russia has not yet achieved that point. The country has not missed any payments until now. Should that be the case in the future, it will rather be due to the sanctions making payment transactions impossible or Russia's willingness to pay than its ability to fulfil the financial obligations. “Given Russia's oil revenues, the country should be more than capable to fulfil its obligations. Whether the country is also willing to do so in the long term, is a different issue. In that respect, a distinction in conditions could arise between investors who are willing to participate in restructuring and bondholders who are unwilling or unable to do as a result of the sanctions. This provides Russia with the opportunity to give ‘friendly’ countries more favorable conditions than ‘unfriendly’ countries.”


Preferential treatment

However, the pari passu principle applies to bondholders, meaning they should be treated equally. Schouten: “In principle, bondholders from a certain country cannot be given a preferential treatment. But the conditions of bonds issued under local legislation may differ from the conditions of government bonds issued under international legislation. In addition to the legislative aspect, many other factors play a role in a possible restructuring of the Russian national debt. For example, the currency in which a bond is issued - dollars or rubles. Moreover, for certain investors it is simply forbidden to still receive payments from Russia or to make payments to Russian entities. All of those factors combined make restructuring very complicated when it comes to Russia.”



What are the consequences should Russia decide to no longer pay its bondholders?


“In that case, the country would become even more isolated and restricted in gaining access to the capital markets. In the short-term Russia is able to absorb a lot through its oil reserves and proceeds from oil and gas supplies. In broad lines, the country is still able to keep its economy running reasonably well. But in the months to come, the Russian economy is expected to shrink and the financial situation of the country will become more problematic. To what extent the country will then be able to hold back the economic contraction depends on the willingness of other countries to help Russia. That willingness cannot be excluded. Even if all Western countries - such as the US - ban Russian oil, Russia can still sell oil to other countries.”


‘Adding insult to injury’

Nevertheless, it looks like Russia will be facing a doomsday scenario in an economic sense. “In terms of food, Russia should for a large part be able to continue to be self-sufficient. But once the supply of everything the country imports stops - technology, computers, chips, and so on – large parts of the economy will come to a standstill. The average Russian will go back in time. He or she may possibly overcome the fact that a visit to McDonald’s is no longer possible, but access to technological knowledge and certain parts for instance, is of great importance to keep an economy running and developing.”


Adding insult to injury, that's what it comes down to should Russia become a defaulter. Schouten: “The sanctions are already causing damage to the economy. The population already prefers having dollars instead of rubles. In the event of a default, a major cycle is triggered after which the Russian economy is expected to end up in a deep recession with high inflation. Also in an economic sense, it is a scenario with only losers.”

Volgende publicatie:
"With only shares and bonds you would now be at a loss"

"With only shares and bonds you would now be at a loss"

Published on: 22 March 2022

"It's a time of volatile markets, which means we do a lot of trades at APG. If only to balance the portfolio over and over again." That is what APG's Thijs Knaap says in the program Zakendoen on BNR Nieuwsradio in a conversation about investments. "I wanted to highlight a transaction that we did in the context of ANET, the ABP Dutch Energy Transition Fund." ANET has taken an interest in the Groningen company, which sells and rents solar panels. "Anyone who can calculate knows that the electricity price has become much higher. As a result, the payback period has become much shorter. That has not escaped most people, so there is a lot of demand for solar panels. can now expand with the money they get from ANET. This is good for the returns and good for the energy transition."

Knaap, chief economist at APG, regularly joins the investor panel of Zakendoen. In today's broadcast, he also discusses how APG had for a number of years taken into account an economic shock in which prices of raw materials would rise rapidly and a subsequent growth shock due to economic uncertainty. "We had put in place an investment policy to prepare us for that shock, but for years it was only one percent inflation and commodity prices fell. So basically it was the reverse of such a shock for a long time. But due to the current high commodity prices and the inflation that is skyrocketing, what we have set up is now doing great. Examples are investments in commodities, hedge funds and infrastructure. While with a portfolio with only shares and bonds you would have certainly be at a loss," says Knaap in conversation with presenter Thomas van Zijl and panel member Mary Pieterse-Bloem.

Listen to the entire broadcast here.


Volgende publicatie:
How is the high price of natural gas going to affect the EU’s green ambitions?

How is the high price of natural gas going to affect the EU’s green ambitions?

Published on: 10 March 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: equity investor Martijn Olthof talks about the consequences of the high price of natural gas for the EU’s green ambitions.

The increase in the price of natural gas, which started last fall, due to increasing demand from industry, has become much more critical because of the war in Ukraine. The war and the high price of natural gas are reasons for the EU to quickly become less dependent on natural gas from Russia. Brussels therefore announced on Tuesday that the EU is going to have to be able to manage without natural gas from Russia before 2030. This REPowerEU plan is a tightening of the so-called Green Deal and the Fit for 55 plan, which aims to reduce carbon emissions by 55 percent by 2030. An even more ambitious climate plan, therefore, and a turning point in European energy policy.

“The Fit for 55 plan was already very ambitious, especially in these times of high energy prices, high inflation and a shortage of labor and materials,” Olthof said. So, is an even tighter target realistic? “It is realistic in the sense that the need is there, and need supersedes law. Such a tightening is also necessary because Moscow can decide to turn off the natural gas tap at any moment. The situation in Ukraine and the high natural gas prices are all the more reason to implement the Green Deal and the Fit for 55 plan more quickly and to focus even more on renewable energy.”

One of the concrete measures in the REPowerEU plan is to shorten procedures for the construction of wind farms and solar panels. A welcome measure, according to OIthof. “But this will only succeed if the bureaucracy around permits is reduced, because companies that want to invest in this often run into that. If, for example, a high-voltage cable has to be laid, especially on land, it often takes years before all the required procedures have been completed. In and of itself this is a good thing, because people do need to have a say in the matter and not everyone wants a high-voltage pylon in their backyard. But one way or the other, this type of infrastructure is necessary, especially if we want to move away from fossil fuels, and particularly from natural gas from Russia, even sooner. It is therefore important that, where possible, without losing sight of the interests of local residents, procedures of this kind are actually relaxed so that investments in the energy transition can get off the ground more easily.”

Accelerating the green ambitions alone will not get Europe off Russian natural gas this year

The REPowerEU plan increases the likelihood that the European Commission will achieve its green ambitions. But accelerating green ambitions alone will not get Europe off Russian natural gas this year. “That really requires emergency measures, and certainly to keep energy bills somewhat affordable,” Olthof argues. “For example, the plan provides for the coordinated and mandatory rapid replenishment of stocks in natural gas storage facilities in Western Europe. There is also talk of temporarily re-regulating energy prices. Countries could pay for this by imposing additional taxes on high profits of some electricity companies that are not dependent on natural gas. And by using the high revenues from the sale of carbon emission rights.”

Another emergency measure could be to keep a coal plant open longer, even though the intention is to close it down as soon as possible, Olthof says. “After all, the targets for reducing carbon emissions have to be met one way or another. If in Europe, we were to keep the coal plants open a year longer, the extra emissions would have to be compensated for in some other way in order to keep global warming to a maximum of 1.5 degrees. And that was already an ambitious goal before the war in Ukraine. In addition, 46 percent of Europe’s coal imports also comes from Russia, so that may not reduce our dependence either. So, the REPower EU plan does not explicitly provide for keeping coal plants open longer, nor does it propose an easing of the issue of emission allowances. So, it seems that the European Commission at least wants to prevent the short-term emergency plan from jeopardizing the green ambitions, in order to, at the same time, push the realization of the ambitions closer in the longer term.”

In conclusion, Olthof sees the high price of natural gas as a clear incentive for Europe’s green ambitions. “The fact that this sharp rise in the price of natural gas is partly the result of our dependence on Russia, naturally increases the urgency of getting rid of fossil fuels immensely. And particularly from Russia. That urgency is very clear. In the short term, with fairly distributed burdens, so as to avoid problems if Moscow turns off the tap. But also in the longer term, so that we will never again have to depend on Russia for our energy.” 

Volgende publicatie:
ABP and bpfBouw sell all investments in Russia

ABP and bpfBouw sell all investments in Russia

Published on: 3 March 2022

Investments of both funds already amounted to less than 0.1 percent of total invested assets

ABP and bpfBouw, APG’s largest clients, have decided to sell all their Russian investments. This makes them the first Dutch pension funds to do so in response to Russia’s invasion of Ukraine.  Both funds expect the selling of the investments to take some time due to the complicated market conditions in Russia.

In total, ABP still invests about 520 million euros in Russia, and bpfBouw about 58 million euros. This amounts to less than 0.1 percent of the total invested capital. As of recent, both funds have been rapidly reducing their investments in Russia. For example, no investments have been made in Russian government bonds that are on our exclusion list due to a binding EU weapons embargo.


“ABP is shocked by the Russian invasion of Ukraine and the violence it has brought about. Our sympathies go out to all the people in Ukraine. ABP has closely been following developments, which has now resulted in selling all our remaining investments in Russian companies,” the fund stated on its website. bpfBouw calls its decision one ‘made on principles’.

Stock exchange remains closed

It is no easy task to act swiftly and sell all investments immediately, as the Moscow stock exchange is still closed. Also, Russia does not accept sell orders from foreign investors. Both funds announce that APG will sell their investments as soon as this is deemed responsible.  They also emphasise that they are closely monitoring developments. This includes keeping an eye on the consequences of the sanctions package imposed on Russia.

First in the Netherlands

As previously stated, the two funds are the first in the Netherlands to sell their investments in response to the Russian invasion. Other countries, including Denmark, Switzerland and Belgium, preceded the Netherlands with similar actions.

Volgende publicatie:
Is stopping corona support such a good idea?

Is stopping corona support such a good idea?

Published on: 3 March 2022

Current issues in the fields of the economy, (responsible) investment, pension and income: every week, an APG expert provides a clear answer to the question of the week. This time: macro-economist and senior strategist Charles Kalshoven about the end of corona support and its consequences. Doesn't the end come too soon?


As of April 1, the government will stop offering corona support. This means employers can no longer make use of, among other things, the Emergency Bridging Measure for Employment and deferral of tax payments. Apparently, they are no longer needed. After all, entrepreneurs can now do business without restrictions thanks to the relaxation of the corona measures and the positive economic outlook, the government reports in a news item. Kalshoven also believes that the abolition of the support packages comes at a good time from an economic point of view, although the situation in Ukraine makes the prospects somewhat more uncertain. "When you walk through the city, you see 'people wanted' signs everywhere. So the economy is doing well, resulting in major shortages in the labor market."


Zombie companies
According to the economist, reversing a measure is always difficult but in this case, it is necessary. "They say there's no measure as permanent as a temporary measure. Think, for example, of the French toll roads or Kok's quarter: measures that ultimately turned out to be more permanent than temporary. Significant measures were needed in this case to prevent corona from hitting the economy significantly. But at some point, those measures must be reversed. For example, the Netherlands Bureau for Economic Policy Analysis argued about a year ago to stop the support because it would prevent the transition of the economy. Instead of letting employees of financially unhealthy companies sit at home paid, you want them to work in more promising sectors. The so-called zombie companies then go insolvent while their employees can be more productive elsewhere. That's how it works in a normal recession. But this recession was abnormal. And there has been no transition due to the support measures."

The number of corporate insolvencies is therefore still very low. "That is partly thanks to the corona support, which was aimed at all employers, financially healthy or not," says Kalshoven. "In a normal recession, insolvencies skyrocket. But this was more of a kind of artificial coma of the economy, in order to fight corona. A year ago, we were still afraid of a wave of insolvencies but fortunately, this hasn't happened so far. This may also have to do with the fact that people have been able to save for a long time and now like to spend that money, for example in the catering industry."

Investors consider the chance that a company will not be able to repay a loan is more likely than before

Back to normal
Even if the number of insolvencies is not rising yet, investors are now clearly taking this more into account. The interest on corporate loans is rising faster than the interest paid by creditworthy governments. The difference is the credit spread, which is growing. And you can partly see that spread as an insurance premium, in the event no repayment is made or is made too late. Investors demand a fee for this. The rising credit spread is a worldwide trend, Kalshoven points out. "It was very low, and is now rising to normal values again. This means investors consider the chance that a company will not be able to repay a loan is more likely than before, and therefore demand more interest on corporate bonds." That's a direct result of stopping corona support. The higher credit risk spread also has a monetary cause. "Central banks are withdrawing from the bond market and announcing rate hikes. Those are signs we're going back to normal."

Consumer confidence
Could the war in Ukraine still affect the positive economic outlook? "That's very difficult to predict. If Russia turns off the gas tap or we say we no longer want Russian gas, energy prices will rise further and the availability of gas will be jeopardized. This could have consequences for greenhouse horticulture and industry, for example. And also for consumer confidence. If gas and petrol remain expensive or even rise in price, we will be hit in our wallets. Perhaps there will be economic support again, this time in the form of a war package." 

If such a support package is needed again, due to the conflict in Ukraine or a new corona outbreak, it is fairly easy to set up such a package again. "The bottleneck isn't whether you can implement it quickly, but whether you as a government have the resources. In the Netherlands, the national debt has increased as a result of the corona support packages, but it's still not that bad. In other countries, the national debt is much higher. Although you may also wonder what is high in this case. What matters is whether the market thinks a country can repay its debt. When corona struck, the European Commission bought up debt securities from EU Member States. This created market confidence in European bonds and more unity in Europe. That unit seems to have grown even larger by the Russian invasion of Ukraine. As a result, I think that a lot is still possible in terms of European support measures, if that turns out to be necessary."

Volgende publicatie:
"What's important to us is that an employee gets insight into his financial situation"

"What's important to us is that an employee gets insight into his financial situation"

Published on: 2 March 2022

APG and Vattenfall have signed a contract under which the energy company can use Geldvinder for three years. Thanks to the digital platform, the 2400 employees of Vattenfall Netherlands can get started with their personal financial goals for now and in the future. Gertjan Meijer (HR Services Vattenfall) and Richard Coonen (COO Geldvinder) tell about the value of Geldvinder.

The goal of Geldvinder is that employees can work on their financial fitness in an accessible and proactive way. This means that they get insight into and control over their finances.  According to Meijer, this fits in nicely with the other tools that Vattenfall offers its employees. "We have a package of five products that allow our employees to work on their financial fitness. For example, there is the personnel fund, which can offer a loan to an employee in special cases. In addition, in collaboration with Nibud, we publish a newspaper about financial issues. For financial insights, an employee can already talk to an advisor of EBC Netherlands and for pension questions he or she can contact ABP. And as a final addition, there is now Geldvinder. That has been used for the past two years by our youth organization Megawatt. Partly thanks to their positive reactions, we decided to offer Geldvinder to our entire organization. The participants think it is a nice addition to our existing package and are pleased with the user-friendliness and convenience of the tool."

Vattenfall pays a considerable amount of attention to the financial situation of its employees. Is there a specific reason for this?
"No, but as an employer we think it is important to take good care of our employees. Part of this is to make financial problems a topic which can be discussed openly. In addition, as an energy company, we have to deal with customers who, for example, have difficulty paying their bills. We are in discussion with Nibud and municipalities, among others, about how we can prevent debt problems or notice them in time so that we can help. That contact with those customers also plays a role in the attention we have for financial fitness as an organization."

What purpose does Vattenfall has with Geldvinder?
"When people have financial problems, this can lead to sick leave or they might no longer function optimally. It is therefore important to make it a topic which can be discussed and to support employees in this as much as possible. We see Geldvinder primarily as a tool with which employees gain insight into their financial situation. For example, what their expenses are, and what is needed to save for certain purposes, such as a house, children or a wedding. That was still missing in the other products we offer. Momentarily, Geldvinder supports our people mainly digitally. In the long run, it will also be possible to accompany the digital support with actual conversations, but we do not yet know whether that adds anything to what we already offer."

An employer can do quite a lot to point out to his employees the importance of financial fitness.  But isn't it ultimately the responsibility of the employee himself?
"In the end, it is indeed. But as an employer you can act as a facilitator and we do that in this way. As Vattenfall, for example, we also pay a lot of attention to vitality. For example, employees can have a preventive health examination carried out or undertake activities aimed at fitness with a discount. Safety is also important in our company. You have to realize that not everyone has an office function at Vattenfall, there are also colleagues working in the power plants and at the wind farms. That work has risks that we handle carefully. As an employer, we continuously listen to our employees to find out what their needs are. Just like we do with customers. And it doesn't stop at the financial fitness or health of our employees. We for instance also promote what we call sustainable employability by offering our employees the opportunity to grow in our company."

Through Geldvinder, Vattenfall can keep an eye on the financial fitness of its employees. Are there no privacy concerns?
"It's anonymous.  And that's a good thing, because we don't want that information to come to us via Geldvinder. We have other ways to do this, such as a conversation between an employee and a manager. At Geldvinder, it's really about an employee gaining insight into his or her financial situation. With inflation making many products more expensive, Geldvinder can also help them with ways to save money. That is more important to us as an employer than that certain scores roll out and we do something with them."

Vattenfall is one of the 20 employers who helped APG set up the platform. Of those employers, 8 employers have now signed a contract, including the Vrije Universiteit and APG itself. APG is still talking with the rest of the partners about possible contracts. "As APG, we started Geldvinder two years ago because we wanted to promote people's financial fitness," says Richard Coonen (COO Geldvinder). "We think that's just as important as physical and mental fitness. APG and Vattenfall are on the same page in this respect. And just like APG, Vattenfall attaches great importance  to good employership and wants to support their employees in various ways based on social involvement. It is therefore nice to see that, as a large employer, they make Geldvinder available to their employees for at least three years."

Volgende publicatie:
“The blockchain has no help desk or insurance”

“The blockchain has no help desk or insurance”

Published on: 24 February 2022

Topical issues in the field of economy, (responsible) investment, pension and income: every week, one of APG's experts provides a clear answer to this week's question. In this edition: Portfolio Manager Jean-Paul Koopmans on the question whether non-fungible tokens (NFTs) are the future or are just a hype.


Paying 200K for a digital image of a monkey wearing a baseball cap and a slice of pizza in its mouth. That doesn't come as a surprise anymore to anyone involved in the world of the non-fungible tokens. In this case, the digital ownership of the image also provides access to an exclusive virtual club: the Bored Ape Yacht Club. The monkey images belong to the most expensive NFTs of the moment, in a market where a value of 44 billion dollars was traded last year. The trade in objects that only exist digitally. In short: a non-fungible token is a digital ownership certificate of an object or event. This certificate is registered in the blockchain: an enormous database distributed globally across many computers. Such token can be bought using ethereum or any other cryptocurrency on a digital marketplace, like OpenSea.

The value of an NFT is determined by the application it offers, Koopmans explains. Think about access to a virtual club or a digital piece of clothing or attribute you can use for a digital avatar in a computer game. If an NFT is not offering a specific application? “The only purpose in that case only really is to show off being the rightful owner or resell it on a trade platform.” The possibility to buy or sell it through the blockchain is something the NFT has in common with a cryptocurrency. But the comparison should stop there. A cryptocurrency first of all is a payment instrument to pay for digital transactions, for example, while an NFT is a unique registration of a good.


“NFTs are mined. During that process, people are in the race to obtain a virtual good, such as an image of a monkey,” says Koopmans. “In the case of the Bored Ape Yacht Club, 10,000 different images were involved. These images all had unique characteristics and the rarer the characteristic, the more popular the image. But it is totally arbitrarily whether you receive an image that appears to be popular or not. And that is exactly the major disadvantage of the trade in NFTs: it is highly speculative and therefore extremely difficult to attach a value to it. This is the difference with asset management where we utilize calculations showing the approximate worth of a company. Those methods are widely accepted. Every NFT is unique, on the other hand, meaning you just have to guess how much such image is or can become worth. New collections of these tokens are constantly issued and 99 percent thereof is worthless. That is why I absolutely consider this a hype. The same as baseball cards and stamps were a hype once.”

However, Koopmans sees a real future for the NFTs. “The activities of a notary in the Netherlands can be fully digitalized in a blockchain. The title deed of an apartment will in that case become an NFT. That can have major consequences for home ownership. It is difficult to divide a title deed into multiple smaller deeds at the moment going to a notary. An NFT makes it easy to split a house, for instance, among multiple owners. The monthly rental income is then distributed amongst them through the blockchain. That saves on notary costs and makes it possible to make very illiquid assets liquid. A house of 500K, for example, can be distributed among 100 NFTs with a value of 5000 euros each. To me, that would be a great, neat application of NFTs. But for the time being, an NFT has no judicial base and the notary's signature does.”


However, the question is whether trading an NFT is safe. “If a name or address on the title deed is incorrect, you can call the notary who can very easily correct the mistake. But the blockchain has no help desk or insurance. That means if you accidentally sent the NFT of your expensive image of a monkey to the wrong digital wallet, you lost it. A mistake is severely punished. And that's not just theoretical. A few days ago OpenSea was confronted with a hack, making it possible to send the monkey images from one account to another by means of a phishing mail. Even OpenSea is unable to reverse that because everything on the blockchain is immutable or unchangeable. In other words: the technology is robust but there's no room for error on the side of the user. Blockchain can however be considered as more open.” That open nature lies in the fact that NFTs can be traded day and night, and that there are no rules yet restricting the trade.

The lack of a judicial base and the safety risks are what stops an institutional investor, such as APG, from investing in NFTs. “Before authorization is given by De Nederlandsche Bank or the Netherlands Authority for the Financial Markets to invest in such instruments, quite a few hoops still have to be jumped through,” says Koopmans. “In order to make it widely applicable, a lot of research still has to be conducted. We are clearly in an experimental phase right now. The progress may be accelerated once the digital euro is introduced. It also stands or falls with the question whether or not it is backed by a community. But that community will only arise if NFTs can be applied in a practical way. I am an investor myself, so an application to me would be the development of cash flow from such digital ownership. This means, for example, music samples or news photos of which the NFTs can be traded.”


Van Gogh
Something similar is already happening in the world of digital art that clearly takes the lead when it comes to digital ownership. “It opens many opportunities for artists to gain more grip on what is happening to their creations, as an NFT allows for a transaction to return a part of the selling price to the artist. When Van Gogh sold a piece of art, he would only receive an amount once and some name recognition at best. NFT makes it possible for an artist to earn, for instance, 5 percent of the transaction amount each time, thus leading to cash flow from art. The same applies if you sell the digital ownership to a song. Everyone using the song has to pay a certain amount that ends up with the owner of the song and the artist. That's how you can exclude record companies.”


Volgende publicatie:
Can we expect a Great Resignation in the Netherlands as well?

Can we expect a Great Resignation in the Netherlands as well?

Published on: 17 February 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Chief Economist Thijs Knaap and Head of Policy Peter Gortzak on the question of whether there will also be a Great Resignation in the Netherlands. “People in America are more sensitive to economic stimuli.”

The Great Resignation is the term coined in the United States to describe a recent trend in the labor market: millions of Americans (there were 47 million last year, 10 million more than in 2020) are resigning. They are generally not doing this so they can sit on the couch at home and do nothing, but because they can get a job elsewhere with better working conditions. Can we expect the same wave of resignations in the Netherlands?

Terms of employment
Gortzak and Knaap see little reason for that at this time. And there are two main reasons for this. First, Gortzak mentions that the United States has a completely different labor market than the Netherlands, which has stricter regulation through collective bargaining agreements, among other things. “Those collective agreements prevent poor working conditions. What also differs from America is that the Dutch government prevented a lot of misery with its support packages, ensuring that employees had no reason to resign. Some economists do think that those support packages were too hefty here, keeping some companies alive artificially. They may have a point, but because of that there was no reason for workers here to resign en masse, as they did in America.”


Like Gortzak, Knaap sees collective bargaining agreements as a major cause that there is less movement in the labor market here than in the United States. There, companies often don’t have a collective agreement, and terminating an employment contract is easier. This leads to dynamism: companies are more likely to lay off, and employees are more likely to look at opportunities elsewhere. “For the service sector, which is big in the Netherlands and regulated by collective agreements, this is often more difficult. A factor like a wage increase therefore affects the labor market sooner in America than in the Netherlands. What you do see here is that, for example, healthcare personnel leave salaried employment and become self-employed for more money. In the Netherlands too, there are ways of negotiating better employment conditions outside of the collective bargaining agreement.”

Bitter fruits
There was some movement in the healthcare sector, as well as in the Dutch hospitality and events industry. “There they are now reaping the bitter fruits of having been closed down by Covid for a long time,” Gortzak states. “Many people who worked in those sectors on temporary or zero-hours contracts found themselves out on the street. Many of them subsequently chose to work at the Covid test stations. That is really different from America, where people start looking for a new, better job while they’re still at an existing job. Because in the Netherlands it only involves specific sectors, you can at most speak of a Resignation, not a Great Resignation.”

In the Netherlands, people are less quick to move, but the pressure on the labor market does exist here too

According to Knaap, the shift in the American labor market is also related to the retirement wave in that country. “In America, people were laid off and given a check by the government, whereas in Europe the companies were kept afloat by the government. The Americans who got such a check just before retirement didn’t go back to apply for jobs. They disappeared from the labor market, creating jobs. In Europe, everyone with a permanent contract stayed employed because they continued to be paid anyway.” That’s another reason there hasn’t been a wave of resignations here. “Because why would you quit if you are still getting your wages? It’s also much easier to fire employees in America. We’ve all seen the image of the American leaving the office with a box in his hands. People there are also more sensitive to economic stimuli. Americans are willing to change jobs for just a small difference in pay. This creates scarcity and then, before you know it, there is a Great Resignation. In the Netherlands, people are less quick to move, but the pressure on the labor market does exist here too.”

More people working more
This pressure, incidentally, is a fairly recent phenomenon. In the 1970s and 1980s, there was a surplus of labor and not enough jobs could be created to put all the unemployed to work. “Now we’re in a reverse situation,” says Knaap. “The baby boomers are retiring and continuing to spend money, so more labor is needed. At the same time, the influx from below, for example through labor migration, is not large enough. Labor market participation has increased dramatically over the past 20 years, in part because older workers are now working until they get their state pension and are no longer taking early retirement. The data therefore does not support the image of a Great Resignation. If anything, it’s the opposite: more people are going to be working more.”


Yet employers are struggling to fill their vacancies. According to Knaap, this has four consequences. “There is more labor migration heading towards our country. Consider the English-speaking lady who speaks to you in the coffee shop. Secondly, it leads to higher wages, at least at the companies that can afford it. The companies that are not able to don’t make it or at least, they can’t grow. And third, it encourages automation. For example, if a restaurant can’t find staff to take the orders, they’ll put a QR code on the table so the customers can order from their phones. A fourth consequence may be that the government comes up with measures to increase the participation of women in the labor market, such as more affordable childcare.”

Volgende publicatie:
APG urges Korean companies to take strong climate action

APG urges Korean companies to take strong climate action

Published on: 16 February 2022

In a letter to CEOs and chairs, APG is calling on large South Korean companies and major carbon emitters to step up their efforts to combat climate change. On behalf of its pension fund clients, APG urges ambitious climate and carbon reduction strategies and commitments.


The letter has been sent to ten large South Korean companies in which APG invests, including Samsung Electronics, Hyundai Steel and LG Chem, a large (petro)chemical company. Despite being large carbon emitters, none of these companies is in scope of Climate Action 100+. This investor-led initiative aims to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.


‘Demonstrate ambition and leadership’

“Climate change is the single biggest challenge the world is facing,” says Yoo-Kyung (YK) Park, Head of Responsible Investment & Governance Asia Pacific. “These companies are important to the Korean economy and the global supply chain. Transforming them into low carbon businesses is critical to the goal of climate crisis mitigation.”


APG calls on the selected companies to evaluate their existing climate change strategies and carbon reduction targets and make sure these are ‘sufficiently ambitious’. The companies are also urged to communicate on their challenges related to climate change and the energy transition with long-term investors and to take their suggestions into careful consideration. The letter states it is important for companies to demonstrate ‘consistent and decisive leadership’ in addressing climate change.


Focus on bulk users of fossil fuels

APG’s largest client ABP announced in October 2021 it will stop investing in fossil fuel producers. The civil service pension fund wants to focus its engagement efforts on bulk users of fossil fuels, such as utility companies and car manufacturers. APG’s engagement with these ten large Korean companies – none of which is a fossil fuel producer - fits in with this approach.

Volgende publicatie:
"We are now in a situation where we have to deal with scarcity"

"We are now in a situation where we have to deal with scarcity"

Published on: 15 February 2022

"The landscape for investors is really changing." That is what APG's Thijs Knaap says in the program Zakendoen on BNR Nieuwsradio in a conversation about the policy options of central banks. "We are now in a situation where you have to deal with scarcity: raw materials such as oil are scarce, labour and also capital. And that's where the central banks come in. There was always plenty of money, but if the central banks start tightening, money becomes scarcer and governments have to pay for bonds. These can then become a serious alternative to other investments."

Knaap, chief economist at APG, regularly joins the Zakendoen investor panel. In today's broadcast, he also discusses the consequences of rising interest rates for pension funds. "It's bittersweet. The rising interest rate is good for the funding ratio of the funds, but at the same time, as a pension administrator, we also have a lot in the portfolio that becomes worth less. But if you look ahead, higher interest rates just mean you can earn more in the financial markets, so I'll look at that. It is also a better time to be an investor than it was a few years ago," says Knaap in conversation with presenter Thomas van Zijl and panel member Simon van Veen.


Listen to the entire broadcast (Dutch) here.

Volgende publicatie:
APG announces investment into Taronga Ventures’ built environment technology Fund

APG announces investment into Taronga Ventures’ built environment technology Fund

Published on: 10 February 2022

APG, on behalf of its pension fund clients, has made it’s first investment into the built environment technology (“Proptech”) in Asia Pacific through an investment in a Taronga Ventures built environment technology fund.  The technologies aim to improve ESG, operation efficiency and quality of the real estate. The fund’s strong focus on ESG related-tech also perfectly aligns with APG’s vision to drive longer term sustainability within real estate.


Click here for pressrelease

Volgende publicatie:
What are the economic consequences of an armed conflict in Ukraine?

What are the economic consequences of an armed conflict in Ukraine?

Published on: 27 January 2022

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: macroeconomist and senior strategist Charles Kalshoven on the possible economic consequences of an armed conflict in Ukraine. “An investor should not be scared off too quickly by geopolitical risks.”


With the amassing of more than a hundred thousand Russian military troops at the Ukraine border, and the response of the U.S. and NATO, tensions have now risen high. It looks like a Russian invasion, followed by an armed conflict may be imminent. The threat is not without repercussions on financial markets. The gains that the AEX recorded in the past six months (about 12 percent) have now completely evaporated - although concerns about the omicron variant of Covid, high inflation and expected interest rate hikes by the U.S. central bank also played an important role. Russian shares lost as much as a third of their value during this period.


Supply Shock
When it comes to the possible economic consequences of a conflict in Ukraine, you cannot ignore Europe’s dependence on Russian gas. Kalshoven: “Our dependence on Russia is very high in that respect (35% of European consumption concerns Russian gas, ed.). If an actual military conflict in Ukraine leads to Putin turning off the gas tap, this will probably mean a sharp rise in the price of gas and electricity. It would be a supply shock, which could lead to a decline in purchasing power and economic stagnation. Because, if there is a shortage of gas, our government would rather shut down factories than literally leave households out in the cold.”

Such a combination of stagnant growth and high inflation doesn’t usually work out well for equities, Kalshoven says. “And the uncertainty that accompanies an actual conflict doesn’t help either. But perhaps there would be one stroke of luck: oil prices don’t have to follow gas prices. When economies slow down a notch, that pushes the price of oil down. As a result, inflation may not be as bad in the end. It is true that Russia is also a major oil producer and can therefore also influence the price by turning off the oil tap just like the gas tap. But waging war is expensive. The question is therefore whether the country can manage without the income from oil in addition to a loss of income from gas.”

The threat of a Russian gas shutdown may also bring an advantage

Don’t run away
From an investment perspective, Kalshoven sees the situation in Ukraine as a realistic threat. But he adds that an investor should not be too easily put off by such geopolitical risks. “We are seeing movements in financial markets that can be attributed to the threat in Ukraine. And of course, as an investor, you can think about all kinds of consequences if tensions are rising somewhere. But it certainly doesn’t necessarily mean that you should just run away from the risks by selling everything. Antti Ilmanen, an investment expert, compares it to participating in a lottery: it could pay off, but usually it doesn’t. Research shows that it usually pays for investors to stay put, because there are plenty of returns against the risks, and geopolitical tensions usually get resolved.”

Moreover, it is always good for an investor to diversify, including with regard to the risks of geopolitical tensions, the economist says. “If there is unrest in Ukraine, it does not necessarily mean that somewhere else in the world things will immediately get out of hand. Of course, all the attention of the international community is focused on this conflict. That could provide an opportunity for countries elsewhere to take controversial steps that suit them.”


Profitable sooner
That threat of a gas supply cutoff by Russia could also bring a benefit. “It makes Europe face up to its dependence on Russia for its energy supply. This makes the importance of the energy transition even clearer. In any case, if you don’t want to be dependent on Russia, you will have to think seriously about accelerating the alternatives. The energy shortage that will arise if Russia’s gas supplies are cut off cannot entirely be solved immediately by means of solar and wind energy.”

For investments in renewable energy, Kalshoven says, a cutoff of Russian gas supplies is likely to mean they would benefit.  “When energy prices rise, sustainable energy projects become profitable sooner. On the other hand, of course, investments in companies or projects that consume a lot of energy suffer.”


Volgende publicatie:
“Whether things are going to go left or right, it’s going to be suspenseful”

“Whether things are going to go left or right, it’s going to be suspenseful”

Published on: 25 January 2022

What economic developments will we see this year? And what characterized the economy last year? Thijs Knaap, Chief Economist at APG, is keeping a close eye this year on central bank policies and on the political and economic developments in China.


As the hot topic of both last year and this year, Knaap still wants to have mentioned Covid. “It was simply the driving force behind a great many things in 2021, positive and negative. Lockdowns, the variants popping up everywhere, vaccines, government support measures, working from home, growing inequality and the dissatisfaction with this.” He is therefore curious what the impact of the omicron variant will be. “If we're lucky, the consequences will be limited to mandatory working from home and bankruptcies of cruise lines and corporate air travel providers. If we are unlucky, then we are on the eve of a long lockdown and the question of what all needs to close down to prevent the new variant from causing a lot of casualties again,” Knaap states.


Big companies
Knaap still marvels at the high earnings growth of companies in the MSCI World Global Index. “Those profits increased by 70% last year. The big companies that are in such an index, despite corona, are doing great. That’s really an unexpected turn of events that’s working out well for investors. It’s an important development, though, because if the big companies weren’t doing well, the economic concerns would be a lot bigger than they are now.”


Sherlock Holmes

What Knaap sees as characteristic for 2021, in addition to the profitability of the large companies, is that all hell has not broken loose, although there was every possibility for that to happen. “There is a Sherlock Holmes story in which he solves a crime thanks to a dog that did not bark when it was supposed to. The storming of the Capitol, the tensions in Ukraine, government debts jumping by dozens of percent; all events that everyone said would have enormous economic consequences but ended up only causing a ripple. Maybe that’s because everyone is preoccupied with Covid, but it’s striking.”  


The question of what China will do is becoming an increasingly important factor

Central banks
Knaap sees central bank policy as a major theme of 2022. “Only when the broad monetary policy is reversed will you find out who can’t manage without that financial support. That’s what we’re going to find out this year. You also never know how fast it’s going to go, that’s the critical thing about monetary policy. For example, they can raise interest rates twice without consequences. Then they do it for a third time and all of a sudden everything crashes. So, whether things are going to go left or right, it's going to be suspenseful.”



In this new year, Knaap is also keeping a close eye on China. “The question of what that country will do is becoming an increasingly important factor. At least that’s what we’re all saying, but we’re not really taking it into account yet. That’s partly because China has always been so incredibly reliable when it comes to economic growth. Always, when the world economy was doing badly, the Chinese started spending more money, acting as an anchor for the world economy. Now China has reversed its traditional policy and is no longer investing itself out of a period of lower economic growth. Indeed, Beijing is now shortchanging large companies like property developers and Internet companies. Then again, it’s a special year for China. Not just because next month is the Winter Olympics, where all sorts of political mishaps can happen, but especially because Xi Jinping’s term in office expires in October. He will probably stay anyway, but it is a tense moment in which the economy has to be in good shape. And in the background is the story of big companies like Evergrande; we don't know if they will go down, whether they are supported or not. That uncertainty around China is definitely going to play a role in the global economy this year.”

Volgende publicatie:
How is the Netherlands affected by China’s faltering economy?

How is the Netherlands affected by China’s faltering economy?

Published on: 20 January 2022

Current issues related to the economy, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Chief Economist Thijs Knaap on the faltering Chinese economy. “The decline in growth had to happen sometime.”


Economic growth of 4 percent in the fourth quarter of 2021. Many a country would sign up for it. For China, which announced the figure on Monday, it is nothing short of a setback. In fact, it is one of the lowest growth rates since 1990. Now that China’s impressive economic growth seems to have come to a temporary halt, the question looms: how will we be affected? 


An event in the Chinese economy can affect other countries in three ways, Knaap says. Through the trade in goods and services, through financial channels and through the price of raw materials. Trade in goods and services, the trade channel, revolves mainly around Chinese exports, and to a (much) lesser extent imports. From the pen you write with to the phone you make calls with: chances are it comes from China. “It’s a bit of a Dutch instinct to immediately think of trade. But the interesting thing is that in the case of China this instinct is correct,” Knaap says. “Because of these three ways, the trade channel with China does have the greatest impact on the Netherlands.” This was noticeable when the Netherlands needed masks at the beginning of the Covid pandemic and China could not immediately supply them. Knaap does not expect the reduced Chinese growth rate to have an immediate major impact on trade with the Netherlands. At most, the delivery time of, for example, phones will be a bit longer.


It might be thought that the trade channel is also the most important in the Netherlands’ economic relations with many other countries, but Knaap says that is not the case. “The best example of this is the United States, with which the Netherlands also does a lot of trade. When the financial markets collapsed there in 2008, things went seriously wrong here too, and banks like Fortis and ABN AMRO ran into major problems. Suddenly the financial channel appeared to have the greatest influence. The recession in the Netherlands was not caused by a drop in demand for Dutch products from the United States, but by exposure to the American financial system. This applies to virtually every major economy with which the Netherlands trades, but not to China. This is because for a long time Beijing wanted as few financial ties with foreign countries as possible. As a result, foreign influence is limited and China has little exposure to the international financial system. As a result, a slowdown in Chinese growth is much less serious for an open economy like the Netherlands than if things go wrong on Wall Street.”

The country cannot continue to grow at a rate of 10 percent every year for the rest of the century

Financial ties
Thus, financial ties between China and the rest of the world are relatively small, although foreign money is increasingly entering China. In 2018, for example, only 8.5 percent of China’s stock markets were foreign-owned. By the third quarter of 2021, that had grown to 10.5 percent. “For APG and other investors, the influence of the Chinese market has increased somewhat in recent years, but it is still not a lot,” Knaap said. This is also reflected in the 2021 figures. “That was a really good year, with equity returns of up to 30 percent in the developed markets. If you look at the emerging markets, including China, the returns were very modest, around 5 percent. That is not great for us as investors, but it is not a disaster because China only occupies a modest place in our portfolio. Then you can see on a small scale what is true for the world at large. If the market in China performs a little less well, the entire world economy will not immediately come to a standstill.”


Then there is the price of raw materials. “When China is growing very fast, there is a big demand for oil, iron and cement and you notice that they are getting more expensive. That was very significant at times; in the late 1990s and early this century. At the time, the price of oil was running very high because the world was not used to this sharply increased demand from China. This is currently the case and Beijing’s influence on the price of raw materials is a lot less now.”


Knaap doesn’t think it’s surprising that China’s growth rates are declining a bit now. “That had to happen sometime. The country cannot continue to grow at a rate of 10 percent every year for the rest of the century.” Due to the limited exposure to the global financial system, the slight hiccup in the Chinese economy does not have to have an immediate impact on the Dutch economy either. In the event of hiccups in production and transport, there is a chance that China will no longer be able to deliver all products on time, which consumers and businesses here would notice. “More interesting is the question whether economic growth will slow down further,” says Knaap. “A really stagnant economy is difficult to adjust at a certain point. Then it remains to be seen how the Chinese population reacts and what impact that would have on the position of Xi Jinping and the Communist Party. The story is that those in power in China rule by the grace of high economic growth. What will happen in a serious recession is difficult to predict. But we are far from there, with 4 percent economic growth. Moreover, the Chinese are very good at managing this kind of economic risk.”


Volgende publicatie:
Knowing what you will get

Knowing what you will get

Published on: 16 December 2021

Whether it is during Sinterklaas or Christmas, December is the month of gifts to many. You usually don't know what you will be getting. And that brings me to the question: what exactly is the value of surprises? Is it better to know more?


Economists tend to refer to the ‘welfare loss’ of giving gifts during this month. This loss arises when gifts don't match the preferences of the person on the receiving end. Should you have given money, he or she would have been able to buy something more to their liking. Which means that person would have been better off. Thirty years ago an economist figured out that up to one third of all the billions of euros spent on Christmas presents is actually wasted money.


It's an information problem as we are unable to look into each other's heads. We succeed slightly better for some people. We know, for example, that gifts to our other halves limit the welfare loss up to 10 percent.


Incomplete information can actually be rewarding when it comes to investing. Just think about it. With a government bond issued by a creditworthy country you have all the information. The certainty of the promised cashflows until the date of maturity is quite large. But the expected return is low. When it comes to shares, the term is in principle indefinite and both dividends and the price movements are uncertain. On average you will be rewarded in the long-term. Exactly by not knowing what you will get, you may earn a risk premium.


More information isn't always better. Investors in an index tracker - but also pension participants - will in many cases not open their ‘package’. The objective for them is to have a well-diversified portfolio. It's not about the exact percentage of shares in Ahold, Apple or Alphabet they have in their basket.


More information is often convenient. But an advantage sometimes brings along its ugly brother. Imagine your doctor having a test able to predict your date of death with great certainty. That is of course super handy if you are accruing pension under own management. You will then know exactly how much money you have to set aside for how long. This means you never pay too much. Yet, I suspect such test will not become very popular. It is, so to say, rather unsociably.


Back to that welfare loss. If everyone would buy his or her own gifts, it's a super-efficient economist solution. But the same applies here: it is not very sociable. Maybe more difficult to express in terms of money, but the surprise itself is worth something too. And the emphasis of the relationship between the giver and the receiver.

Knowing what you will get, just isn't what happens in life. Like John Lennon sang to his son Sean: ‘Life is what happens to you while you’re busy making other plans’.

And as we have now entered the atmosphere of the music top 2000, we can also quote the Stones: ‘You can’t always get what you want. But if you try sometime you'll find you get what you need’.


Charles Kalshoven is macroeconomist and senior strategist at APG

Volgende publicatie:
Will the economic outlook change, now that Covid appears to be here to stay?

Will the economic outlook change, now that Covid appears to be here to stay?

Published on: 3 December 2021

Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: Chief economist Thijs Knaap on whether the economic outlook should be adjusted now that it seems that Covid will be with us for the foreseeable future.


Just under two years after the Covid outbreak, the Netherlands is again in lockdown due to increasing infection rates. At the same time, reports are coming in from southern Africa of a new Covid variant. At the end of 2020, we still thought that vaccines would get the virus under control, but now that hope seems to have faded. How will the new developments around Covid affect government policy, consumer confidence and financial markets? "If the government decides to stop the support, it really becomes a less positive story and an economic blow with bankruptcies and rising unemployment is inevitable," said Knaap.



When Covid first took hold, the Netherlands benefited greatly from the support measures of the Dutch government. Central banks also took action, so the impact on companies and financial markets was lower than expected. In fact, the number of bankruptcies is historically low to this day. Investors did not lose their money because companies were able to survive thanks to the support. Knaap: "Government support measures make sense in a temporary crisis, as Covid was considered to be, until recently. But understandably, there will come a point where the government may think, 'enough is enough'. After all, you can't keep companies afloat until the end of the century if their existence is no longer feasible in the new situation." So, for the economic outlook, a lot depends on what the Dutch government and other countries decide in the coming period.


The longer the lockdown remains in place, the worse it is for economic dynamism. "At the end of the day, you need people to engage in business. But who is going to open a restaurant in this day and age? The economy is getting a hit regardless. That also argues in favor of not phasing out the support measures, so that at least the existing companies don't go bankrupt," says Knaap. The advantage for the Netherlands is that it still gets money when it issues bonds. "We can continue to do that for years to come without being affected," he says. For other countries, and certainly emerging economies, the situation is more dire.



Consumer confidence also plays a role in the economic outlook. "Economic growth occurs when companies make a profit, and they do that when they sell enough of their products to consumers. This has been difficult in the recent period due to problems with product supply. However, there was a lot of demand for products and services recently because consumers hoarded money during Covid by not being able to go to the pub or go on vacation," Knaap said. "The new lockdown still constitutes another setback for many people, with the hairdresser and theaters having to close earlier. That leads to less consumer confidence, making consumers more cautious in their spending. And that's never good for the economy."



The news of the omicron variant had already led to falling stock prices. What does that say about the prospects for the stock market? "Investors always have the previous shock still in their minds," states Knaap. That was in March 2020. But after first going down sharply, stock markets rose to record highs. It is possible that investors expect that the new outbreak will not lead to an economic crisis. Still, Knaap takes into account that it will turn out differently than last time. "The falling prices could now persist for a longer time, because we no longer see Covid as something temporary." Should we therefore adjust economic expectations? "The storyline is changing now. The previous storyline started with the pandemic after which the vaccinations followed and we expected economic recovery with rapid growth within two years." With these latest developments, that chance of rapid recovery now suddenly seems a lot further away."


The next few weeks will show whether this is a last hiccup of the virus and this will be a short lockdown. If so, there is a good chance that the positive economic expectations of a few weeks ago can be sustained. This is also due to the fact that the government can still intervene for a long time and stock prices have not fallen extraordinarily hard after the emergence of the omicron variant. Still, the new lockdown is creating uncertainty, including among consumers. The longer Covid remains among us, the more likely it is that at some point the government will stop its generous support policy, causing bankruptcies and unemployment to rise and stock markets to take a hit as well. The story is not over yet.

Volgende publicatie:
“Is the end of the trade conflict between Europe and the US good for the economy?”

“Is the end of the trade conflict between Europe and the US good for the economy?”

Published on: 4 November 2021

Current issues related to economics, (responsible) investment, pensions and income: every week, an APG expert provides a clear answer to the question of the week. This time: chief economist Thijs Knaap on what the end of the year-long trade dispute between the US and the EU means for our economy.  “It is a step in the right direction but the bigger picture around trade is globally negative.”

The trade war unleashed by US President Trump partly ended on 31 October 2021 - the fight with China is still in full swing, but on the US-European front tempers have calmed somewhat.  The conflict began on 1 June 2018 with the introduction of import tariffs by the US - 25 percent on steel and 10 percent on aluminum from the European Union, among others. The EU did not let that move go unanswered and raised import tariffs on a large number of US products from 5 percent to 31 percent. In addition to steel and aluminum, this also included products like motorcycles, cranberry juice, whisky, shoes and clothing.

With the suspension of these EU tariffs (which, additionally, were to be doubled on 1 December 2021) and the removal of a substantial portion of the US import duties on European steel, the hatchet seems to have been buried. How will we notice this in our economy?

Dirty steel

Knaap: “An economist is not happy about import tariffs, because they protect a country's industries artificially, which leads to inefficiency. If a country with a certain industry cannot compete in the world market on its own, it is better to import those products from countries that can make them cheaper. Economically, it is always better if everyone focuses on what they do best. In this respect, the recent agreement between the US and the EU is good news. At the same time, it is only a step in the right direction. Because the bigger global trend is that continents are actually sealing off their markets.”

And according to Knaap, it is not like all trade barriers between the US and Europe have disappeared. “The Harley-riding bourbon drinker can breathe a sigh of relief, because the import duties on it will disappear completely. But the Americans are more reticent when it comes to steel: the import duty will only disappear for a certain quantity of steel. Moreover, the US and the EU have indicated that they no longer want ‘dirty steel’. That may have to do with the environment - steel from China has a bigger ecological footprint - but they seem to be doing it mainly to protect Western producers from cheaper Chinese steel.”


Confrontation with vulnerabilities

Knaap is referring to the agreement that steel must be produced entirely in the EU/US trading bloc in order to qualify for duty-free status. This should prevent Chinese steel from undergoing the final minimal processing in Europe before being exported to the US.


“Protecting the Western world” seems to be related more to a strategic pursuit of independence than to protecting jobs. Knaap: “During the pandemic, countries were confronted with their vulnerabilities. Masks, for example, had to come from China, it was difficult to get respirators, and so on. People reconsidered whether they wanted to be dependent on others for such strategic products. Steel is a particularly strategic product, especially in military terms. China, too, aspires to this independence - as do Europe and the USA - and wants to be able to manufacture aircraft, cars, microchips, etc. itself. In any case, this will not lead to the protection of national jobs - one of Trump's political promises before the introduction of import duties on steel. Employment in the US steel industry first saw a modest upturn from 82,000 to 88,000 during the Trump administration, but then fell again and is now back to 82,000. Moreover, in the 1980s, it still employed 200,000 people. And this decrease has everything to do with increasing productivity per employee through automation. That effect is much stronger than that of an import tariff.”   

The real problem

The geopolitical factor, then, is where - from an economic point of view - the real problem for the global economy lies. “It is becoming more and more important. There is less and less understanding of globalization and trade in goods. Globalization is also less and less popular with politicians. As an economist I prefer to see it differently. It is certainly a sign of the times that we’re going to put more and more partitions between different parts of the world. So yes, the effect of ending the US-European trade conflict on the economy is positive, but limited. The larger trend shows declining economic globalization. That’s always inefficient and inconvenient. It’s at the expense of jobs and it will have a negative effect on global trade.” 

Volgende publicatie:
“What are the chances of ‘Glasgow’ producing concrete results?”

“What are the chances of ‘Glasgow’ producing concrete results?”

Published on: 28 October 2021

Current topics with regard to the economy, investment (responsible investment in particular), pensions, and income: Every week, an expert at APG provides a clear answer to the “Question of the week”. This week: Joost Slabbekoorn (Senior Responsible Investment & Governance Manager) examines the probability of the Glasgow Climate Summit producing concrete results. “Financial support of developing countries will be one of the most hotly disputed items.”


On the eve of the Glasgow conference, news items are following one another at a hitherto unprecedented pace. If one thing has become clear from this cascade of reports, it is this: We are not in good shape. The countries participating in the Paris Climate Conference in 2015 had agreed that the global temperature should not rise by more than 2 degrees by 2100, and ideally by no more than 1.5 degrees. If we continue at our current pace, we will reach that 1.5-degree rise as early as in 2030. The UN’s UNEP environmental program warned that the 2.7-degree mark will even be in sight by 2100 if we do nothing.


First Step

There is plenty of work to be done. However, the question is: Who will be taking the first step? “Historically speaking, responsibility for CO2 emissions lies primarily with Western countries. Nevertheless, countries such as China and India, above all, are currently registering a rapid increase in CO2 emissions. These countries cannot develop in the same fossil fuel-driven way as Western countries did in the past. They are simply too big for that. However, the rapid increase in CO2 emissions in those countries can also be attributed to the relocation of European steelworks to China!”


Countries such as India and China are able to partially shore up their development with renewable energy. Western countries at the Paris conference pledged 100 billion euros per year in climate development aid to support them in this. That promise has, however, not yet been kept. Slabbekoorn explains, “Chances are that this will also be one of the most hotly debated topics in Glasgow. Developing countries want rich countries to provide them with financial support in order to restore confidence. The ‘trade’ in targets between countries will be another topic of discussion. In this scenario, rich countries contribute to the reduction of CO2 in developing countries, because it is cheaper and easier to reduce these emissions there than on their own territory. Unambiguous rules are needed to facilitate this trade and to be able to verify it.”



Slabbekoorn can identify a number of points on which action is needed. “One of the most important priorities is to phase out the use of coal for the production of electricity. Coal produces quite a lot of CO2, even though a good alternative is available: green electricity. Deforestation is another source of huge CO2 emissions. A third priority is to set a realistic price on CO2 and to stop funding the fossil fuel industry. It is remarkable that people in the Netherlands are currently provided government support to pay their energy bills. This is understandable, given the current situation, but it does mean that the government is indirectly funding fossil energy. Rising energy prices are also making many countries reluctant to accelerate the termination of coal use. And combating deforestation requires the support of Brazil. Unfortunately, Brazil currently has a president who is a champion of the logging sector. In short, things are not looking good in Glasgow when it comes to these three priorities.”


With the current gloomy outlook, it is inevitable that some measures will be impacting the lives of consumers. Slabbekoorn explains, “It is imperative that consumers are inconvenienced; otherwise, they will not change their behavior. And the sooner the transition to a more sustainable world is initiated, the less money and effort it will cost. Ultimately, this will also be more pleasant for the consumer. If we don’t take action now, we will have to intervene much more strongly later on. Then the break with our current way of life will be a lot more dramatic, through significantly higher costs for governments and consumers, for example.”



If the outcome of summit produces few or even no results, further global warming appears to be inevitable. “But there are many more roads leading to Paris,” Slabbekoorn argues. “If it nevertheless turns out that no agreement will be reached in Glasgow, this does not have to mean that remaining within the aforementioned 1.5-degree limit is impossible. A much stricter policy on energy and sustainability will therefore need to be imposed in the coming years. And the question is whether such policies will indeed be taken into effect, considering that countries are showing quite a bit of reluctance when it comes to adopting overly strict measures. In the meantime, we are already noticing the physical effects of higher temperatures.


It is ultimately up to the countries participating in the climate summit in Glasgow to incorporate possible agreements into their legislation. The Paris climate agreement is legally binding, but there is no international instrument to enforce it. “Once these agreements are embedded in national legislation, a country can be held to them by the courts. We saw this in the Netherlands in regard of the case brought by Urgenda against the Dutch government. Diplomatic contacts are very important during a summit like this. Still, this brings us back to the first point, which is who will be taking the first step. It doesn't look as if ‘Glasgow’ will produce any concrete results, but you can never predict what will happen at a summit like this. So, I’m keeping my fingers crossed,” says Slabbekoorn.

Volgende publicatie:
“Policymakers appear capable of steering away from disaster”

“Policymakers appear capable of steering away from disaster”

Published on: 21 October 2021

On October 21st, the largest pension funds of the Netherlands look back on the financial results of the third quarter. An appropriate moment to address some key questions. Is the value growth of APG’s clients’ portfolios during the pandemic likely to continue? Are bonds still attractive to an institutional investor? And if so, why? What are the implications of Covid for office space and the urban real estate market? And why is APG, as a believer in active investing, moving into index investing? APG’s Chief Investment Officer Peter Branner looks ahead and shares his vision on the basis of four statements.


It’s All Over Now? Last year we have had a bad economy and really great realized returns. Are those returns ‘borrowed from the future’? (Or is the story that Covid has been a support for the economy in the longer term?)

"The value of our clients’ portfolios fell after Covid hit, and instantly began recovery when governments and central banks started to support the market and the economy with fiscal as well as monetary stimulus. Before the end of 2020 the value of the portfolios was higher than before the pandemic. There are four reasons for this: the interest rates were lower, government support kept the economy going, the vaccine race provided strong hopes of a way out of the crisis, and APG happened to own, on balance, more of the securities that benefited from the pandemic and the economic support (and other events that took place during the year), than the market.

If there will be a time to “pay back” we don’t know. What we do know is that central banks and governments will dial back support, which will put pressure on asset prices. On the other hand, investors may be willing to continue to pay higher prices for risky assets, because they have learnt that policymakers are capable to steer away from disaster. Besides, the economy may start a new growth trajectory, driven by investments in clean energy and supported by new ways of working and collaborating. Markets will find a balance between these opposite vectors."


Bond Theme. ‘The future of bonds ain’t what it used to be’. The trend of declining interest rates is unlikely to continue and may even reverse. That makes bonds a lot less attractive from a return viewpoint.


"The interest we get on a bond is negative, so we pay money to own them. One main reason we would continue to hold them is the possibility that the interest goes even more negative, increasing the value of the bonds we have. And this has indeed been the case on average over the last 20 years. Shorter term, this would happen in a financial crisis, or when central banks go on lowering interest rates to achieve their inflation goals. Yet we already saw that in the 2020 covid crisis and the interest rate did not fall by that much, so owning bonds did not help our clients as much as they used to.

The silver lining here is that the current value of our clients’ liabilities, the pensions to be paid out in the future, behave like a bond.  So if bonds are a less attractive asset to own, this also means that liabilities are not as risky to have taken on. This has been and still is the main argument for owning bonds for pension funds."


I’m A Loser. The Dutch architect Rem Koolhaas is on record saying ‘Nowadays, city dwellers are losers’. Does Covid imply bad news for office space and urban real estate?

"The affordability of urban housing is under huge pressure. This is partly demand driven: people flock to cities for the economic, social, educational and cultural opportunities cities offer (including the presence of exciting architecture from Koolhaas and his peers). Covid has helped change the way people meet, socialize, work and collaborate. It is not yet clear, how this impacts the amount of floor space an office worker need, hence it is not a given that this will decline. What is clear is that the requirements for offices become harder to meet. Offices still need to be easy to reach by public and private means of transportation, become more resource-efficient and have excellent and robust technological infrastructure. Inner city development, concentrated around public transport hubs, remains one of the most sustainable ways of providing society with ways to interact."    


Play With Fire. Meme stocks, bitcoin, etc. - markets seem like a game these days. Flows seem more important than fundamentals. Does not sound like efficient markets. So why is APG moving into index investing?  

"Active investing means choosing what securities and assets to buy in a certain market, instead of just buying the market index exactly. To do that, our investment managers need to figure out what the value of the assets in a market could be, and pick the most attractive. This costs money, so active management needs to deliver more return than the costs. It costs time, because it may take a while before those attractive investments indeed bring in more money than the index. And it takes a bit of luck, because the assessment may be wrong. It is a bit similar to a sports game: even the best trained team, with the most skillful coaches and players, will not start scoring in the first minute and will not win every game. But it has a good chance of ending up in the top of the table at the end of a long season.

APG knows how to do active management, and is convinced it can add value, but we have to acknowledge that, based on cost and risk considerations, not all clients want to take an active approach in all markets they invest in. And given our size, APG is able to help those clients as well with our innovative responsible index solutions."

Volgende publicatie:
"Is the fear of the inflation specter justified?"

"Is the fear of the inflation specter justified?"

Published on: 21 October 2021

Current issues in the fields of the economy, (responsible) investment, pension and income: every week, an APG expert provides a clear answer to the question of the week. This time: Senior Strategist Frank van Weegberg on whether the increased inflation is short-term or not. "Globalization has pushed prices down for decades."

Now that the inflation rate in Europe has risen to 3% and in the United States to 5%, the key question is: is it a one to two-year 'peak' or 'shock', or will inflation last longer and thus erode purchasing power? There is a good chance that it is the former, says Van Weegberg. "Current inflation consists mainly of two effects. One is caused by production, logistics and supply issues. The other effect is due to the sharp rise in gas prices. We believe that both effects are temporary. And so the current inflation is probably also transient."

The first effect (the production, logistics and supply issues) occurred worldwide as a result of the corona pandemic. Van Weegberg: "For example, the scarcity of computer chips, the consequences of which have affected many industries. But a lot was also stuck in the Suez Canal, as a result of the blockade by container ship Ever Given in March. All this has led to increased prices for many products. But at some point, when the last aftermath of those problems has subsided and supplies have recovered, those prices will fall again."   

Shale gas

The second effect - increased oil and gas prices - is not expected to last long, according to the Senior Strategist. "The main causes are also temporary in nature: problems with gas production in Norway, a low supply of wind energy due to an unusually quiet period and the lack of approval for the Nord Stream 2 gas pipeline. Such price increases are sudden effects that also disappear, partly because, for example, the supply of shale gas increases. That is relatively laborious to produce, but with a high oil and gas price, it becomes profitable again."

And increasing Covid-19 infections in the winter period? Can they still throw a spanner in the works? "New lockdowns could put pressure on the supply of products again, which could lead to a new inflation peak. Even then, the effect on inflation is not structural. This can also be deduced from the expectations of official parties, such as central banks. For example, the European Central Bank expects inflation in the Eurozone to fall to 1.5% in 2023."  

So when will that structural, long-term inflation be lurking? Van Weegberg: "That kind of inflation is more likely to arise when we're faced with a wage price spiral. If wages rise too much, it pushes up the general price level because labor becomes more expensive. But a spiral like that only arises when high economic growth and low unemployment occur simultaneously. Unemployment in the Netherlands is low but in the Eurozone, it's still relatively high at 7.5%. That's why a wage price spiral now is unlikely."

Labor unions
In addition to the high European unemployment, there are two other reasons why we probably will not see the effect of rising wages on inflation, according to Van Weegberg. "The power of labor unions has diminished. Even in traditional industries such as the metal industry, far fewer workers are unionized these days. In newer sectors, the degree of organization is even lower. Add to that the increased number of self-employed workers and it's not surprising that the bargaining position of labor unions has deteriorated.  
In addition, the effect of rising wages on the general price level has also diminished. Globalization has meant that we've started to import more from countries with lower wages. That has pushed prices down for decades. So if our own wages rise, it will no longer lead to inflation as quickly as before." 

The 'specter' as it loomed in Germany in the 1920s is far off yet. And the inflation that is now occurring is actually quite healthy, says Van Weegberg. "We've had very low inflation for a long time, even less than 1%. Normally in Europe, we're around 1.5%. That 3% is well above that. I don't expect the ECB to raise interest rates in the next two or three years. But if persistently high inflation ultimately forces the ECB to raise interest rates, it will be better for everyone in the long run. The housing market may start to normalize again. And it's going to pay to save again. Presently, you have a loss of purchasing power on your savings. No government wants that."

Volgende publicatie:
Investors urge South Korea to step up its climate efforts

Investors urge South Korea to step up its climate efforts

Published on: 14 October 2021

APG lead signatory of pressing letter to Korean government


APG and 22 other large global investors encourage South’s Korea’s government to outline a clear and fully Paris-aligned decarbonization pathway and stop building new coal-fired power plants. Clear climate policies will help Korean companies to transition to net zero emissions by 2050 or sooner. APG is co-leading this investor initiative on behalf of its pension fund clients.


In a letter to South Korea’s Presidential Committee on Carbon Neutrality, the investors state that for many of the Korean companies they engage with, national policy on energy and climate change is critical to the achievement of their net zero ambition. The letter is supported by Climate Action 100+ and signed by investors with a combined €5.8 trillion in assets under management, including lead investors APG, BMO Global Asset Management, EOS at Federated Hermes and Sumitomo Mitsui Trust Asset Management.


Companies need clear climate policies

According to the signatories, South Korean companies need clear signals from policymakers to enable them to make a successful transition to net zero emissions, mitigate climate risk and protect long-term value. “This must include clear dates for phasing out coal in line with achieving the Paris objective of keeping global warming to 1.5°C,” the letter says.

The investors urge that the International Energy Agency’s recently developed Net Zero 2050 scenario be embedded in the transition pathways the Committee is developing. “It is critical these pathways are fully aligned with the Paris Agreement, reach net zero emissions by no later than 2050 and do not further embed coal in the Korean economy, delaying the inevitable and urgent transition that is required,” says Yoo-Kyung (YK) Park, Head of APAC Responsible Investment & Governance at APG. 


No coal expansion

In August, APG sent a separate letter to the Korean government to express its concerns about private coal-fired power plants under construction there. APG also sold its stake in the Korea Electric Power Corp. (KEPCO) last year, citing the state-run company's construction of coal plants in Vietnam and Indonesia. “The expansion of coal-fired power in South Korea goes against efforts to combat climate change,” says YK, “It also puts assets at risk of becoming stranded and unprofitable due to low utilization and extra efforts necessary to offset carbon emissions.”


Climate Action 100+ is the world’s largest investor engagement initiative on climate change. It involves more than 615 investors, responsible for over €47 trillion in assets under management. The initiative aims to ensure that the world’s biggest corporate greenhouse gas (GHG) emitters take action on climate change.

Volgende publicatie:
“Is the Chinese real estate crisis a risk for the world economy?”

“Is the Chinese real estate crisis a risk for the world economy?”

Published on: 7 October 2021

Current issues in the field of economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap on whether the global economy will be hit by the sky-high debt of Chinese property developers. “The chance that all hell will really break loose and Chinese citizens will lose faith in the government’s ability to solve this crisis is small.”


Will the embattled Chinese real estate market cause a global crisis in financial markets, like what   happened with the collapse of Lehman Brothers in 2008? That is the question that has been occupying the minds of many investors since it became known that Chinese real estate giant Evergrande (total debt €260 billion) could no longer meet its interest payment obligations. According to Knaap, this is unlikely. “The first question is whether this real estate crisis is a threat to the Chinese economy itself. You can never know that 100 percent for sure, but there is only a small chance of that. This is because the Chinese government is in a much stronger position to intervene than Western governments, partly because it owns portions of the financial sector. If the government wants a company to get a loan from the state bank, then the company will get the loan. This way it can bail out companies when it wants to.”


Money back

Moreover, the Chinese have a lot of debt but mostly to themselves, says Knaap. That too contributes to the government’s ability to manage the economic risk. “There is no need to be afraid that foreign creditors will be on the doorstep, wanting their money back immediately.” 


A financial domino effect like the one caused by the fall of Lehman Brothers is therefore not likely, according to Knaap. “The risk of a crisis in a particular sector spreading to the entire economy is much smaller in China than it is for us, due to that dominant government role. People are not afraid to let things blow over. There are some examples of where this has gone well, such as Baoshang bank and Huarong asset management. Also, don’t forget that the Chinese government itself actually triggered this crisis. For that reason alone, it is a very different situation than with Lehman. At that time, it was not the government that provided the trigger, but the housing market.”


Taking on pain

In what sense did the Chinese government evoke this crisis? Knaap: “Chinese real estate developers are borrowing heavily and robustly. Those in power are now having some reservations about this. Because if debts continue to rise, the financial risk will simply become too great. To put a stop to this, the regulator introduced a number of rules last year. Because of these new, stricter rules, real estate companies with a lot of debt were no longer able to borrow money in the way they were used to. As a result, they had to rely on selling their own properties. In the end, that didn’t happen fast enough, so the debt-based growth model came to a halt. That’s painful. China has chosen to take on the pain while the problem is probably still local and manageable. And we should actually be happy about that. Because if things go well, this intervention will prevent companies’ debt position from really becoming a systemic risk.”


And that also keeps the risk to the global economy manageable, Knaap explains. “As long as the Chinese don’t panic, it won’t damage their economy and the problems in the real estate sector will probably be manageable. There is no crisis of confidence as with Lehman, in which there was a fundamental uncertainty in the financial markets. Globally, the economic impact is therefore limited to foreign creditors of Evergrande who are unlikely to get their money back. The likelihood for all hell to break loose and Chinese citizens losing confidence in the government to solve this crisis is small. But if that does happen, we will also notice it here, in the form of fewer exports and problems with product supply.”


Limit reached

However, according to the economist, we should take into account the effect of the stricter credit requirements on the debt accumulation of the Chinese. “The more borrowing is going on in China, the more we will notice this globally in an economically positive sense. Until now, China has always dealt with economic headwinds by taking on more debt and thereby investing in the growth of the economy. But the limit of that method has now been reached. Chinese people are less likely to get mortgages and some companies are no longer granted credit. This is at the expense of economic growth, and so people abroad are going to notice. That is the main effect and it will likely be felt globally." 


Volgende publicatie:
“Will our economy suffer from the tight labor market?”

“Will our economy suffer from the tight labor market?”

Published on: 26 August 2021

Volgende publicatie:
“Pension funds bear a huge responsibility, for the Netherlands of today and the future”

“Pension funds bear a huge responsibility, for the Netherlands of today and the future”

Published on: 29 July 2021

Annette Mosman took the reins as CEO of APG in March. She is hoping to gain as many inspirational insights as possible in the first months of her new job. That is why she is holding 25 meetings on her hike from Amsterdam to Heerlen. This was a journey through the Netherlands of Tomorrow, with a different person accompanying her on each leg of the trip. Her companions were colleagues, but also people from outside APG, like Tuur Elzinga, chairman of the Netherlands Trade Union Confederation.

The Rolling Stones, Bruce Springsteen, Coldplay and Pink: they all performed here. The Malieveld was their outdoor concert hall. That said, protesting trade unions also regularly take over the “Haagse grasveld,” the famous field in The Hague. There’s no doubt that Tuur Elzinga has also left many footprints in that field. His history with the trade union movement stretches back to 2002, when he was appointed as a policy officer at the Netherlands Trade Union Confederation. Almost twenty years on, he is now chairman of the trade union and employers’ and employees’ organizations since March 10 of this year, to be precise. He also represented the Socialist Party (SP) in the Upper House of the Senate for nine years. This means that he is as familiar with the green polders of the Netherlands as the green benches of the Senate.


Getting fat on the bones

Elzinga believes that things need to change in the Netherlands. In his opinion, the pandemic is a tipping point: the market-driven approach that has gone too far must make way for a revaluation of society. The pandemic has revealed how indispensable certain sectors are to our society, like health care, education and childcare.. “It is precisely those vital sectors that have fallen behind in recent years,” Elzinga reckons. Schools, hospitals and kindergartens have been run like businesses, and cut backs have been the order of the day. This has led to a shortage of ICU capacity, protective equipment and staff during the pandemic. “We need to get fat back on the bones again; we need proper reserves. That may not be very efficient, but it stops the whole of society from grinding to a halt when times get tough.”


Fears for the future 

The pandemic has also widened the gap between the poor – those with few prospects – and the rich. The Netherlands has become more prosperous in recent decades, but not everyone has benefited from this. The flexible labor market has put permanent jobs at risk and wages have not risen enough in line with profits. “Inequality has widened, and imbalances have occurred,” Elzinga tells us. Not to mention the climate crisis, from which there is no escape, both literally and figuratively, as we face extreme weather, forest fires and floods across the planet. Elzinga points out that this leads to unrest. “People are concerned about their own future and that of generations down the line. As a country, your sole aim may be to make as much money as possible, but what kind of home will we be leaving to our children and grandchildren if social cohesion is under pressure and our planet is being eroded?”


Plus another one million permanent jobs

Fortunately, the pandemic has also prompted politicians – from left to right – and some employers to realize that the Netherlands of Tomorrow demands change, believes Elzinga. He believes that we can start rebuilding the country without delay. We already have the blue print: broad-based prosperity for the whole of the Dutch population. That is the approach underlying the Social and Economic Council’s draft advice that trade unions and employers presented together this spring: a package of measures for the new cabinet. First and foremost, the labor market must be reformed: we must return to more permanent contracts, instead of flexible employment. Elzinga would like to see at least another one million permanent jobs. “People need job and income security. They want bread on the table, they must be able to pay the bills and have enough disposable income for their leisure time.”

The climate change price tag

Broad-based prosperity also calls for greater investments in public funds for vital sectors, like health care and education. For example, better terms of employment must stop the trend of having unmotivated employees: it may be more enticing to get out of bed in the mornings and take up the task of teaching if wages rise and work-related pressure is reduced. More must also be invested in the quality of public services, such as the Employee Insurance Agency, the tax authorities – here we have in mind the childcare benefit scandal – and yes, also pension administration. Elzinga says, “Better performance from institutions may also help to close the current gap in confidence.” For the long term, there needs to be substantial investment in tackling climate change. “We have to stop procrastinating and start addressing the issue. The longer we kick the can down the road, the higher the price tag will be.” So we need more funds to accelerate the energy transition, while at the same time being socially accountable by helping people who lose their jobs to get other work.  


Strong government required

Given the long societal wish list, the government can no longer keep its distance, Elzinga believes. Since the eighties, the maxim in The Hague has been: strong market forces, small government. “A market is a good for ensuring that there is enough to round, but you can’t leave everything to market forces,” Elzinga reckons. “We are now faced with the mess that the mantra of liberalization, privatization and deregulation has left us in.” Rebuilding the Netherlands calls for a stronger state, one that actively helps shape the society of the future through public participations and targeted investments, and legislation and regulation must ensure that market participants accept their social responsibility. This need for a government with a firm hand on the rudder does not stop at the borders. For example, Elzinga welcomes the G7 plan for a global minimum tax rate of 15 percent for multinationals. It will make tax avoidance through tax havens more difficult because it will put an end to competition among countries that lure foreign investors by having the lowest tax rates.


Tech giants

It is also crucial to have international regulations that curb the influence of Big Tech and Big Data. Elzinga adds, “Big tech companies are capitalizing on data that we as consumers are producing ourselves. They are using existing digital infrastructure, without giving anything in return.” The same is true of multinationals that are getting patents for innovations that they were not solely responsible for conceiving. After all, their smart employees are educated at publicly funded universities and draw on the body of knowledge that our knowledge-based society has accrued in centuries past-. We are standing on the shoulders of giants. “Data, knowledge, but also for example raw materials and energy sources such as the sun and wind and ultimately our entire planet: it belongs to all of us. What gives a handful of companies the right to claim ownership? Why should managers and shareholders be allowed to become wealthy beyond description from it, while employees and the rest of society have to make do with the crumbs?” says Elzinga.

I hope that one day it will no longer be necessary to strike

“Give employees control”

The pyramid must be turned upside down. That doesn’t call for revolution; instead it calls for a radical change in direction, through gradual, democratic means, according to Elzinga. He believes that the first tentative steps down this new path have been taken. Governments are slowly starting to take back their traditional role, companies are taking more responsibility for their environment and consumers, citizens and major investors are more inclined to hold them to account. The next step is to give employees and society a real say, Elzinga argues. “'Give those people who come up with all those innovative ideas a voice, the ones that do the real work, who are the actual rightful owners of companies’ products and services: all of us, in other words. Who’s the boss? Who decides? As it stands now, they are managers and shareholders; in the future we should all be able to be in charge.”


From shareholder return to social gains

In recent years, Elzinga has been conducting the negotiations for the pension agreement on behalf of employers’ and employees’ organizations of the Netherlands Trade Union Confederation. It’s a historic agreement; designed to keep old-age provisions affordable going forward, without abandoning the principle of solidarity. “In the new system, the contributions you have accrued are reflected more directly in your own pension accrual, but we will still ensure that people who are not so fortunate in their careers will also be able to have a good pension, and we will spread the risks across the generations.” That said, Elzinga believes that the pension discussion is far from over. If interest rates remain this low in the coming years and investment returns structurally decline in the future, as predicted, then it will not be possible to keep the promise of an indexed-linked pension and the trust gap in society will widen. Pension funds could then take the next step: from shareholder return to social gains.


Pension benefits in kind? 

Elzinga explains, “Pension funds should examine the needs people have later in life. Do they then only need money? Or would they rather have a nice place to live, good care and quality of life? Invest in that directly as a pension fund; put pension money into new kinds of housing for senior citizens, good care for the elderly and restoring social infrastructure, so that it is to hand when people need it.” This would be a type of pension in kind. And why only invest in provisions for old age? Pension funds can also be used to improve today’s society. Here we have in mind investments in the tight housing market – which mainly affects young generations – or in good education, for a robust Netherlands of Tomorrow. Elzinga adds, “Pension funds have major assets and that means they bear a huge responsibility, for the Netherlands of today and the future.” 


An end to strikes

During the pension agreement negotiations, the Netherlands Trade Union Confederation, together with the National Federation of Christian Trade Unions in the Netherlands and the Trade Union for Professionals, halted train traffic for a day to apply pressure for a slower rise in the state pension age. What does Elzinga think: will there still be strikes in the Netherlands of Tomorrow? “I suspect so. In the meantime, there will be conflicts of interest between employers and their workforces. But I hope that one day it will no longer be necessary to strike: if employees are given a real say, they can be part of the decision-making process and conflicts of interest will become a thing of the past. If you are the boss, there’s no need for you to strike.” So the Malieveld of the future will be solely for the successors of The Stones and Coldplay, in other words: the ultimate festival grounds? Elzinga laughs, “Yes, that’s where we’ll gather to simply have a good time, do stuff we enjoy or celebrate together, for example, the great pension system that we have in the Netherlands.”      

Volgende publicatie:
“When will the rise in the housing market stop?”

“When will the rise in the housing market stop?”

Published on: 24 June 2021

Current issues related to economy, (sustainable) investments, pension and income: every week, an expert from APG gives a clear answer to the question of the week. This time: macro-economist and senior strategist Charles Kalshoven, about the forecast of the Dutch housing market.

The prices of owner-occupied homes keep rising. Can that continue to go well? Kalshoven suspects it will. The economist thinks that the most likely (base)scenario is that the housing market is not going to collapse for the time being. The crucial factor in that is the interest rate.

“In the early nineties, we were still seeing percentages around 10% and the average interest rate in that decade was well above 6%. But it will not go up that high this time. We also expect that the rise will be very gradual, while incomes grow along with the economy. But for now, the ECB is keeping interest rates low, which is also reflected in mortgage rates. We think it may take five to ten years before interest rates reach a new, somewhat higher equilibrium. You shouldn’t think about the levels of the 1990s, or the ‘years zero’ - when interest rates averaged about 5 percent. For the homeowner, this is a favorable scenario, because low interest rates make everything more expensive. Stocks and bonds as well as homes.”


In a more unfavorable but also unlikely scenario, a new virus variant rears its head, with accompanying lockdowns. The global economy would be dealt another blow. 

Kalshoven: “In that scenario we would see low interest rates, but also high unemployment and many bankruptcies. Banks may then put the brakes on the provision of mortgages. In that case, a buyers’ market would emerge, with house prices falling. We see no signs of this scenario at the moment. There is no sign that the housing market is cooling.”

Another unfavorable scenario arises when the economy is going too well, strangely enough. In a tight labor market, employers are more likely to meet new wage demands. And that can lead to permanently high inflation. “Central banks would then have to raise interest rates. Borrowing then becomes more expensive and house prices may come under pressure. This happens especially if interest rates rise abruptly, because then the negative interest rate effect dominates the positive effect of rising incomes. But such a wage-price spiral is really still a long way off.”

Anyone who wants to understand the Dutch market for owner-occupied houses cannot ignore the scarce supply of houses. “That supply is not so flexible here. We live in a small country, where you can’t just build more - partly also because of the strict rules. So, if demand increases, the housing market can only respond in one way and that is by raising prices. There are now plans to build 1 million houses by 2030, but I have yet to see it. You can’t live in plans.”

Big bag of money
So, the Dutch are putting more and more money on the table for their homes. As to where that money is coming from, Kalshoven doesn’t have to think long. “Since the early 1990s, interest rates have fallen sharply and, at an average of 1.6 percent (April figure - ed.) they are still historically low.  As a result, buyers can bid more on a house, which drives prices up. For those who don’t own a house yet, it is unfavorable, of course.”

Besides those low interest rates, there are other reasons why we can enter the housing market with such a big bag of borrowed money. “The lending standards have also become more flexible. In the 1980s you could only get a mortgage on the income of the breadwinner. Later, you could also add the income of the part-time working partner - usually the woman. And women have also started working more, so double earners can get higher mortgages.


So it is mainly the persistently scarce supply and the long-term low interest rates that are the foundations of the Dutch housing market. Unless the economy surprises us unpleasantly, those foundations are not going to fall away anytime soon. The market for owner-occupied homes will remain buoyant for the foreseeable future.”

Volgende publicatie:
“Will the computer chip shortage lead to inflation?”

“Will the computer chip shortage lead to inflation?”

Published on: 17 June 2021

Current issues in the fields of economics, (sustainable) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap, about the economic consequences of the worldwide shortage of computer chips.


“The simplest and most immediate effect is that chip machine manufacturers are doing well. As of the end of October, ASML’s share price has now risen by 85 percent, while the AEX has risen ‘only’ 37 percent over that period. But of course, this will not continue. For an investor in chip machine manufacturers, it is helpful to know that the demand for chip machines has some of the same characteristics as the hog cycle. When the demand for pork chops - and therefore the price - is high, hog farmers expand. On the other hand, when that new meat comes onto the market, there is immediate excess, which then brings the price down. The same is true of the market for chip machines. As with pig farmers, it takes a while for new supply to be created. This carries the risk that in a few years there will be a surplus of chip machines and chips. An investor in chip machine manufacturers must therefore know exactly when to stop.”

The indirect effect of the chip shortage is much greater, Knaap explains. “You can’t think of anything without a chip in it nowadays. The shortage is a well-known bottleneck for car manufacturers, but it is currently affecting the entire supply industry. When it doesn’t get enough chips, it also leads to a shortage of other parts. There is a risk that the Western economies will stall because of this shortage.

Everything is expensive now, not only chips but also oil. If the prices of many components and semi-finished goods go up, in the worst-case scenario a situation similar to the oil shocks of the 1970s will arise. The big question hanging over the market is: will it lead to inflation? That is the fear of many investors. Central banks are now pursuing a loose monetary policy by buying up government bonds and corporate bonds, among other things. This is good for investors, because it pushes up the prices of bonds and shares. But if inflation does occur, central banks lose the excuse to pursue this broad monetary policy. They must then stop buying bonds and in that case the mechanism works the other way round. The chance for stock markets to fall increases and, because the current monetary policy has been pursued since 2008, you could even see a major correction. It may be a bit of a shock to investors.”

Crypto currency
The main cause of the worldwide shortage of chips was the extremely high demand caused by the Covid-19 pandemic. Working from home, and the increased demand for game consoles in particular, played a role in this. Still, according to Knaap, that’s not the whole story. “The demand for chips has also increased due to the increased popularity of crypto currencies. A lot of chips are needed to mine bitcoins. And there is also a lot going on on the supply side. In the early 2020s, many companies in Asia were at a standstill due to lockdowns. You can still see that in the availability of goods, including chips. Plus, Covid-19 made us ask ourselves whether we want to be so dependent on foreign producers for certain products - mouthguards, medical equipment, and so on. The answer is no. There will be more production in Europe and the US again, rather than in China. That’s good for our independence. But it does mean that everything will become more expensive.”

Volgende publicatie:
“My wife would be proud of me because I am enjoying life”

“My wife would be proud of me because I am enjoying life”

Published on: 25 March 2021

How do you deal with work and money for now and later in life? Do you live day by day or do you deliberately plan your financial future? And will you deal with “later in life” yourself, or are you part of a pension fund?

Ruud Vorstermans has been enjoying an excellent pension for the past year and a half. But he would trade it all in if it could bring back his wife.



Ruud Vorstermans (68)

Profession: retired, worked in automation and as a labor expert

Weekly hours: full-time

Income now: 3,200 Euros net per month

Saving: about 50,000 Euros

Pension arranged? Yes


You have been retired since August 2, 2019. How do you like it?

“I did not experience any black hole, even for a second. In fact, I don’t have enough time. I was really ready not to have to do all kinds of things anymore. That is also because, in addition to my work, I was the primary caregiver of my wife for years. She had metastasized breast cancer and died of that in 2018.”


That is sad, you must really miss her.

“Yes, my wife brought out the bet in me. We were married for nearly 43 years; what we had was unique. Of course, I miss her, but getting stuck there doesn’t help anything. Four weeks after her cremation, I went to Italy for a month with a camper. I traveled around Toscani, to places where we used to go together every year. A trip down memory lane. I enjoyed it a lot. I am keeping the memory of her alive. On our first wedding anniversary after her death, I got dressed up and went to her favorite restaurant, in a suit and tie and sat down with a picture of her across from me. I really enjoyed doing that and I still do it every year.”


How do you spend your days, now that you are no longer working?

“To start with, I walk and ride my bike a lot. I have made it into a daily routine to walk about seven kilometers. I ride an electric bike, because then I can also cycle on vacation in hilly landscapes. And I have given myself a new hobby: doing jigsaw puzzles by Jan van Haasteren. Once in a while, I buy a second-hand puzzle through Market Place or Facebook. If the seller lives within a 20-kilometer radius from where I live in Bergen op Zoom, I go and pick it up on my bike. That gives me a nice goal for my bike trip.”

And what else do you do?

“Sudoku, cross word puzzles, sometimes I write poetry, I have a blog, I cook. My wife was a great cook. When she got sick, I started to use her recipes so that she could give me instructions. I took pictures of everything and made it into a cooking blog. That helped me a lot, especially right before she died. I also do volunteer work for the breast cancer society. My wife did that too, from the day she got breast cancer until she died from it. She was given an honorary membership for that. It soothes me to continue her work. I have a Facebook group for women with metastasized breast cancer. Because I see the positive in everything, I try to give others who don’t do that a different vision. Life doesn’t stop when you’re sick; try to enjoy what you do still have as much as possible.”


Don’t you miss your professional life at all?

“No. I enjoyed my work for 46 years, but that was enough.”


What kind of work did you do before this?

“In 1975, I started at the former GAK (common administration office, ed), my dad worked at the head office in Amsterdam. I had no idea what I could do with my high school education and my dad said: why don’t you try working here. I got to try out automation and I stayed there for 25 years, and eventually became a manager. But at a certain point I needed a change. In the early nineties, I went back to school and completed 3 higher education courses; a legal one, related to personnel issues, commercial economy and business management. After that I started to work as a labor expert. First at the former UWV and later in health and safety services. That’s what I did until I retired.”


Did you do that full-time?

“More than that. I started at six in the morning and didn’t go home until after rush hour. I worked about 12 hours a day. But that really paid off. All those extra hours provided me with a 30 percent bonus and if you achieved a certain target, you could get an extra bonus on top of that. That’s what I used to buy our first camper.”


What was your income before you retired?

“My monthly salary was 5,500 Euros gross.”


And what is your income now, from your Old Age Pension and your company pension?

“Annually about 55,000 Euros gross, which works out to about 3,200 net a month. In addition to Old Age Pension and my own pension, I also get a survivor’s pension of 87 Euros a month. My wife only worked part-time for about fifteen years.”


Are you happy with what you get?

“I realize every day that I have an excellent income. I would trade all the money in the world to get my wife back, but that is not an option, and I’m very happy with this. It is very comfortable. In fact, I am able to save 1,000 Euros every month. My kids, who make a lot more money than I ever did, say: come on, Dad, why don’t you buy a new TV? But why should I? Would it make the programs any better? I spend my money consciously. When I didn’t have a lot of money, I bought all kinds of things, but now that I have money, I’m like Uncle Scrooge.”

When we realized that my wife was not going to get better, we shifted our life into 6th gear

What are your regular expenditures?

“I spend about 1,500 Euros a month on my mortgage, car, taxes, insurances and subscriptions.”

What else do you spend money on?

“I enjoy eating out and going to the theater. These days, during corona times, I sometimes order take-out. And I regularly go on vacation. The camper is ready to go to the Veluwe in two months.”


How much do you have in savings?

“About 50,000 Euros. It used to be a lot more, but when we realized that my wife was not going to get better, we shifted our life into 6th gear. Before that, we already did a lot, but instead of going to a concert in De Kuip, for example, we would go to concerts in London, Dusseldorf or Dublin. Just to make it even more memorable. We also took trips to America and Indonesia. In about six years we spent about $100,000 in savings. It was a little scary to my wife sometimes; she would worry that we wouldn’t have enough left for the maintenance of our house. But I wanted us to enjoy our life together while we still could and make memories. And I still enjoy them every day. I think she would be proud of me, because, despite the fact that I miss her, I am enjoying my life to the fullest.”

Volgende publicatie:
"We need a different definition of a good life"

"We need a different definition of a good life"

Published on: 22 February 2021

Two economists on a different form of economic growth


Economic growth is beginning to take its toll on people and the environment. Nature has reached its limits and people are rebelling against the unequal distribution of wealth. According to economists Hans Stegeman of Triodos Investment Management and Charles Kalshoven of APG, we need a drastically different way of thinking. "People are getting a different sense of what is valuable."


Hans Stegeman is a Chief Investment Strategist at impact investor Triodos Investment Management. He regularly publishes about the boundaries of the current economic system. Charles Kalshoven is a macro-economist and senior strategist at APG. In his columns, he discusses economic developments and how they affect our daily lives.


Hans, as an economist, you regularly publish about your belief that the current system of striving for endless economic growth is no longer sustainable. What do you mean by that?

"I'm not against economic growth, but it does have major negative consequences for the planet: climate change, increasing social inequality and the drastic decline in biodiversity. Some say that new technology can solve those problems, but I haven't seen any convincing evidence for that. I sincerely hope technologies such as CO2 capture (capturing CO2 as soon as it is released during combustion and thus preventing it from entering the air, ed.) will help, but I have my doubts. I really think we need to move to a different form of growth. Incidentally, I think economic growth is a limited concept for measuring progress. Growth doesn't always equate to happiness or well-being."


Charles: "Classic economic theory sees economic growth as the outcome of capital and labor. But since the industrial revolution, an important factor has been added, namely energy. And so far, this has mainly been fossil energy. This comes at a price, in the form of damage to people and planet. But it's not or insufficiently passed on in the price of products."


Still, poor countries need economic growth to get out of poverty.

Charles: "That's a dilemma. If you want to fight poverty, you need economic growth. And that in turn leads to a greater demand for energy. On the other hand, you want to limit the use of energy to combat climate change. So we have to look for a different kind of growth that requires less energy and makes more use of renewable energy. We need to handle raw materials more carefully and reuse them; we have to transport less stuff and people all over the world. What helps is that economic development usually leads to smaller families and thus lower population growth. And that benefits the climate."


Hans: "The boundaries of our ecosystem are rock-hard. There's only one planet earth. That can't be changed. We'll have to find a way to create prosperity for everyone within these limits. Prosperity is very unevenly distributed. The richest 10% of the world - and that includes most of the Dutch - are buying more and more stuff, without really being happy about it. While at the same time, there are billions of people who are starving and barely have a roof over their heads. This should be fairer."


How do we get such a sustainable, fair form of economic growth off the ground?

Hans: "We have to think differently in the West. We live in a competitive world where everyone wants to race to the top. With an expensive watch or designer clothing as a status symbol. But do they really make us happy? Or are they values such as togetherness and being satisfied with what you have? To achieve such a change in thinking, all parties involved must cooperate, the government, businesses, consumers and investors. You have to play chess on all boards. And each game starts from a different point. That's very complex."


Charles: "We need a different definition of 'a good life'. Currently, it's mass consumption. And status. But the things that bring status can change. The younger generation no longer thinks it's 'cool' to work 80 hours a week, and attaches importance to other things than making a lot of money. The government also has a role to play in this. It has to create a remote prospect, something we all want to aim for. And then stimulate this with laws and regulations. For example, by including the costs of CO2 emissions in the prices of products."

    Hans Stegeman (left) and Charles Kalshoven


Has 'corona' changed our way of thinking? Has it brought a sustainable economy closer?

Hans: "People are getting a different sense of what is valuable. For example, I asked if this interview could start 15 minutes earlier, because I wanted to pick up my son from school on the sleigh. What I've learned is that people are motivated by positive rewards, not by the deterrent effect of a negative outlook. If we want to change something in our economic thinking, we achieve the most by inspiring with positive examples. In particular, indicate what is possible and how this can contribute to our well-being."


Charles: "I've noticed that corona has had an influence on politics. In Europe, corona has really given a boost to green initiatives, such as the Green Deal (an action plan to make the economy of the European Union sustainable, ed.). The attitude of governments has also shifted from austerity and financial discipline to investing in society and supporting affected people and businesses. Increasing public debt is no longer as taboo as before.


Hans: "The virus has made us more aware of our relationship with nature. I do think that the government has missed an enormous opportunity by not attaching any conditions to support for businesses, such as Schiphol. This would have been a great opportunity to accelerate the sustainability of Schiphol. Maintaining something that isn't sustainable is actually a waste of money."


What role can pension funds and investors play in making the economy more sustainable?

Charles: "We play an important role with the money we manage on behalf of our pension funds. And that goes beyond excluding producers of bad products. We talk to businesses. For example, about how they can make the switch from fossil to sustainable energy. Or because we think they're doing very well and we want to share their example with other businesses we invest in. One example is Arcadis, which started to report on how they contribute to the Sustainable Development Goals, partly through discussions with us. The challenge is that there's still far too little information about the sustainability of businesses and projects. We therefore press businesses about it and contribute to the development of sustainability standards, so that as many investors as possible speak the same language."


Hans: "As an investor, you need to know where you want to go. And contribute to that. That goes much further than a CO2 footprint that's lower than the market. The market as a whole is a reflection of the world and the world is far from sustainable. At the start of our investment process, we determine which positive developments we want to contribute to and that's what we invest in. Examples include micro-finance, solar panels or online platforms where you can buy food products directly from the farmer. Things like nuclear weapons and fossil energy are not part of that."


Triodos Investment Management has customers who consciously opt for a 'green' investor; APG serves pension funds which participants must be affiliated to. Does that make a difference in the way you can implement responsible investment?

Hans: "Triodos once started excluding certain investments on ethical grounds, and that has evolved towards a focus on positive impact. APG naturally has to deal with the expectations of participants in the pension funds for which it works. APG is given a specific mandate from the pension funds and this involves a specific policy. But it could be stricter, as far as I'm concerned. There has to be a lower limit. If the core of a business isn't sustainable and improvement discussions come to nothing, you have to leave. APG could also explain in more specific terms what positive impact it wants to achieve."


Charles: "We believe in the power of engagement (improvement discussions with businesses, ed.). If you sell all fossil energy companies, it won't make the world any greener. By talking to them, you can bring about positive changes. Companies such as Shell and BP understand very well that we have to move to a different form of energy. There's a lot of knowledge and money in the energy sector. We must take advantage of that. With assets of over € 500 billion, we can also take relatively large stakes in companies, which allows us to exert influence. But we also sell a company if engagement doesn't work in the end."


Hans: "There are fossil companies that are switching to green energy. Ørsted from Denmark, for instance. But the real change isn't going to come from the big oil companies. Most still want to milk their oil supplies for as long as possible. Rather, change comes from small businesses with smart, new ideas. We take relatively large stakes in these types of start-ups and non-listed companies. This allows us to exert influence right from the start."


Is investing in a sustainable economy at the expense of the returns you can achieve?

Hans: "Not in the longer term. Of course, in a year of rising oil prices, we won't benefit from it. But we won't be bothered by this in the longer term. Also, sustainability information provides additional insight into a business. It's a persistent myth that sustainability comes at the expense of returns. There are numerous studies that indicate that this is not the case."


Charles: "I agree. Responsible investing not only tackles financial risks, but also other types of risks, such as the risk that your real estate properties will flood due to climate change. If you know exactly where this is happening and take preparatory measures, you actually reduce the risk of your investments. Unsustainable investment, now, that's a risk."

Volgende publicatie:
APG advocates ‘just transition’ in the automotive industry

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?



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.”  



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.