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Responsible investing

Sustainable and socially responsible investing is of great importance to APG and the pension funds we work for. But why exactly? And what is that all about, socially responsible investing? What do we invest in? And what do we not invest in? What are the objectives that we and our pension funds have in mind? Read all about that - and more - here.

Theme
Sustainability, Long-term investment
Collection Contents
116 Publications

“Is the EC’s new climate plan bad for the stock market?”

Published on: 15 July 2021

Current issues around 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, on the impact of a stricter climate policy and higher carbon prices on the equity markets.

 

Fit for 55. That’s the name of the plan launched by the European Commission on July 14 to reduce European emissions by 55% by 2030. An important part of that plan is the revision of the Emissions Trading System (ETS). Companies that cause emissions must compensate for them through the purchase of carbon emission rights. They can do this within the ETS.

 

The general expectation is that Fit for 55 will lead to higher and more widely applied prices for carbon emissions in Europe. To meet the Paris targets, it will have to, despite the large increase we have already seen this year. But higher prices for emissions lead to higher costs for companies. There is speculation here and there that this will lead to falling stock markets. Justified?

Winners and losers

According to Olthof, this reasoning is much too short-sighted. “It's clear that the price of carbon emissions has to go up considerably for it to really make a difference. And in most Paris scenarios that will happen. But you really can’t predict that a rise in the price of carbon will lead to a certain fall in stock markets. It depends on so many more factors. What you will see is that there will be winners and losers among companies.”

 

Whether a company becomes a “winner” or “loser” depends on a number of factors. “Companies that do not make the switch to zero emissions in time and provide a product for which a more sustainable alternative exists are going to suffer from a high carbon price. Their product will simply be too expensive compared to the alternative. Coal-fired power plants, for example. The customer can also turn to companies that supply green energy, with zero emissions. These energy companies incur fewer costs and can therefore supply their products more cheaply. But if you are a cement company, for example - which causes considerable emissions - there are currently few alternatives for your product. Those kinds of companies can largely pass the cost of a higher carbon price on to the customer. As a result, they suffer less quickly and less directly when emission allowances become more expensive.”        

It is precisely the fossil companies that can benefit from clear policies like Fit for 55

Beneficiary

Yet Olthof says it is still difficult to predict exactly which companies will benefit from a high price for carbon emission rights. “There are simply too many uncertainties about how the energy transition will unfold. Whether there is an alternative for a certain product and at what price depends very much on technological developments. It is difficult to predict these in the long term.” 

It may not seem like it at first, but it is precisely the fossil companies that can benefit from clear policies like Fit for 55. The beauty of Fit for 55 is that it offers clarity to many companies that are crying out for these kinds of measures. For example, there will be more support for green fuels. If the carbon price also rises, companies will have a double incentive to produce biokerosene, for example. That is what companies want, because then they know for sure that there is a market for it. Many oil companies also say they are in favor of a high and stable carbon price. Only then will the capture and storage of carbon become profitable. What is needed is a healthy combination of various policy measures. That means, for example, that you require airlines to use a minimum percentage of biokerosene or other green fuel. If you also ensure a higher carbon price, among other things, and apply it more broadly to more sectors, companies will take steps towards new technologies. Because they have more certainty that they will also earn back the large investments required for this.”

 

Vigorous counter measures

And even if a higher carbon price pushes down stock prices, you can ask how bad that is, Olthof says. “What’s the alternative? If you get catastrophic climate change, or harsh government intervention because the Paris goals are not met, that might be much worse for the stock market. To meet those goals, massive investments are needed. The government must then ensure that it is attractive enough for the private sector to make those investments. With a sharp and clear climate policy, it can ensure that.” 

Volgende publicatie:
Sustainability-linked bonds: new opportunities, but avoid greenwashing

Sustainability-linked bonds: new opportunities, but avoid greenwashing

Published on: 9 July 2021

APG recently participated in the issue of a number of sustainability-linked bonds (SLBs). Companies issuing such bonds promise to meet predefined sustainability objectives; if they fail to do so, they need to pay investors extra interest. This offers flexibility, but also means investors must pay close attention to the sustainable objectives to prevent greenwashing. “We need to do our homework thoroughly to weigh the credibility and robustness of these deals.”

 

Tesco is one of the growing number of companies to have issued a ‘sustainability-linked bond’ (SLB) this year. In January, the British supermarket chain launched a bond that is linked to the company’s commitment to reduce greenhouse gas emissions. Concretely, Tesco pledges to cut its greenhouse gas emissions by 60% in 2025 (compared to 2015). If the company fails to meet this objective, investors will receive a coupon premium.    

Rapid growth

APG on behalf of its pension funds participated in Tesco’s €750 million SLB issuance, the first of its kind by a retailer. So far, SLBs remain a small part of the ESG fixed income landscape, relative to conventional labeled (green, social and sustainable) bonds. But SLB issuance is growing fast in 2021. According to Bloomberg, over €12 billion of SLBs has been issued this year to date, nearly 5% of total labeled bond issuance in that period.

So what is a sustainability-linked bond? SLBs allow the issuer to raise money for general purposes while promising that if they fail to meet specified sustainability targets they pay investors extra interest. Such key performance indicators (KPIs) are, for example, ‘percentage of recycled materials used by 2030’ or ‘reduction of greenhouse gas emissions by 2025’. This is different from conventional green bonds, where the money raised has to be spent on specific sustainability projects.

The instrument is still fairly new. In 2019, Enel issued the first SLB. The Italian power utility company targeted a 55% share of renewables in its power generation capacity by the end of 2021. Investors will receive 0.25% extra interest on their bond holdings if Enel fails to meet this commitment. In the run-up to the issue, Enel discussed the particular features of this bond with a select number of investors, including APG.

Prevent green washing

Since mid-2020, the number of SLB issuances has been steadily rising, an encouraging sign of momentum in this nascent market. The flexible structure of SLBs may offer an alternative for companies which – owing to the nature of their business – face difficulty in finding sufficient (or sufficiently large) sustainability projects to issue a green bond. Retail companies, like Tesco, are an example. SLBs allow such companies to finance their overall sustainability strategy without having to ringfence the money for particular green projects, e.g. building a solar power plant.

However, that same flexibility also means that investors have less concrete information on how the proceeds will be used and the potential impact they will have. “Flexibility in terms of use of proceeds combined with customized key performance indicators could make it easier for issuers to ‘sustainability wash’ and twist objectives to suit their needs,” says Joshua Linder, Credit analyst Fixed Income at APG. “For that reason, some investors are hesitant to support this new structure. But we see a lot of potential for SLBs, provided the integrity of the market is firmly maintained. We need to carefully scrutinize the KPIs to find out if they are ambitious and robust enough and ensure they can be properly verified and tracked.”

Tesco’s SLB is aligned to its newly introduced Sustainability Bond Framework which, in turn, follows the International Capital Market Association (ICMA) principles on SLBs, released in June 2020. The ICMA principles aim to further develop the key role that debt markets can play in funding and encouraging companies to contribute to sustainability. The principles pertain to setting KPIs, bond characteristics, reporting and independent verification.

Hybrid bond

Recently, APG also participated in a ‘hybrid’ bond issued by NextEra Energy. This bond, one of the first of its kind, combines features of both conventional green bonds and SLBs. NextEra Energy is a US utility holding company overseeing the largest investor-owned utility in the United States, which serves more than 11 million residents across the state of Florida. NextEra Energy also owns a clean energy business, which is the world's largest generator of wind and solar energy.

The bond structure follows the ICMA green bond principles and ringfences the bond’s proceeds for specific renewable energy projects. However, it is also stipulated that if the company fails to fully allocate the proceeds within two years, investors will receive a 0.25% interest premium until maturity. Also, projects must become operational within twelve months after issuance, or replacement projects must be selected that still meet the two year window, or be subject to the higher coupon rate.

“These features create an added layer of accountability compared to conventional green bonds,” says Craig Hauret, Senior Credit analyst Fixed Income at APG . “It ensures proceeds are allocated to eligible green projects in a timely fashion. Another attractive feature is the requirement that proceeds finance only wind and solar energy projects that will become operational after issuance. As opposed to some green bonds which allocate proceeds to ‘refinance’ projects that were completed two or three years ago.”

This is not to say there aren’t any drawbacks to the deal, notably the absence of a green bond framework which typically serves as the basis for project eligibility, as well as the lack of independent audit. “We have communicated that concern to the company,” says Hauret. “However, we have confidence in NextEra due to its long-time status as an ESG leader, combined with the transparency into the specific renewable energy projects being financed.”  

Upholding market integrity

APG is one of the world’s largest green, social and sustainable bond investors and an advocate of the labeled bond market, including SLBs. “We are, however, very selective in terms of which SLB deals we support in these early stages of market development in order to uphold market integrity,” says Linder. “For instance, we have seen SLB issuance where one of the sustainability targets had already been achieved. Clearly, such a bond does not meet our standards.”

The need for transparency and effective reporting practices is crucial for upholding the integrity and credibility of this rapidly growing market. To make (potential) issuers aware of our expectations and foster healthy development of the market, APG has published the Guidance on Sustainability-Linked Bonds.

 

APG’s fourth annual ‘Growing the US Corporate Green and Social Bond Market’ roundtable event for institutional investors, capital market underwriters and other stakeholders this year focused on SLBs.  “Growing the corporate labeled market in the US whilst upholding market integrity has been a key objective since we started these events, “ says Anna Pot, Head of Responsible Investments Americas at APG. “We have made substantial progress on activating our peers and partners across the industry to stimulate issuance of high-quality corporate labeled bonds.”

Volgende publicatie:
APG takes 20% stake in Sweden's largest district heating and cooling supplier

APG takes 20% stake in Sweden's largest district heating and cooling supplier

Published on: 1 July 2021

A consortium led by APG has acquired a 50% interest in Stockholm Exergi Holding AB. With close to 10 TWh in yearly energy sales and an annual turnover of almost €700 million, Stockholm Exergi (700 employees) is the largest supplier of district heating in Sweden. The company is an industry leader in sustainability and has the ambition to become climate positive by 2025.

The consortium also comprises of PGGM, Alecta, Keva and AXA Investment Managers. APG has acquired the 20% stake on behalf of pension fund client ABP, which wants to further shape its climate- and responsible investing ambitions. The consortium has bought the 50% stake from the Finnish energy group Fortum. Stockholm Exergi's 800,000 customers are concentrated in the Stockholm municipality. The remaining 50% stake is owned by the City of Stockholm.


Standout

Carlo Maddalena, Senior Portfolio Manager at APG: “The Stockholm Exergi investment is an excellent fit with APG’s infrastructure strategy and with its strong sustainability focus, it is at the core of the energy transition.”

According to Maddalena, Stockholm Exergi's fundamentals are very strong. “High temperature-driven heating requirements in Sweden, an AAA-rated country, cause district heating consumption per capita to be amongst the highest in the European Union. This makes district heating a nationally important core infrastructure for Sweden. In addition, Stockholm Exergi also supplies electricity to the local grid, which resolves many of its current capacity issues. The transaction was a unique opportunity to acquire a leading sizeable utility business in Scandinavia. Investments of this quality are scarce in the region."


International role model

The company's sustainability goals are very ambitious. "Stockholm Exergi has transformed itself to a fossil-free energy supplier and wants to become climate positive by 2025. To this end, it has already developed a number of projects, which are still at an early stage. This strategy is aligned to the commitment of the City of Stockholm towards becoming an international sustainability role model. As such, Stockholm Exergi plays an important role in these local – and national – climate ambitions."


The APG deal team that worked on the transaction was composed of Carlo Maddalena, Bart Saenen, Jan Jacob van Wulfften Palthe, Marjolaine Lopes and Silvan Koortens.

Volgende publicatie:
APG selling half of Spanish rental property portfolio

APG selling half of Spanish rental property portfolio

Published on: 1 July 2021

The Spanish rental market is growing steadily. Reason enough for APG to invest heavily in this market. Now APG is selling half of these homes to the Australian company Aware Super. Why? And why would a Dutch pension investor invest in Spanish rental homes anyway?

In 2017, APG and Spanish partner Renta Corporación launched Vivenio, which invests in rental properties in major Spanish cities like Madrid and Barcelona. A stable investment, yet APG is now selling half of it to an Australian partner, pension fund Aware Super. APG will receive more than 400 million Euros for this and will reinvest half of it in Vivenio for further growth in the quality and quantity of the residential portfolio. Aware Super is investing the same amount.

From APG, Rafael Torres Villalba, expert portfolio manager of Real Estate Europe, has been closely involved with Vivenio since its inception as one of the directors.    

Why did APG start investing in Spanish rental properties four years ago?

Torres Villalba: “It is an attractive growth market. In the past, the Spanish government encouraged the population to buy houses. This has been successful; over 80% of Spanish homes are owner-occupied. In the Netherlands, that figure is a little more than 55%. But in recent years a growing group of Spaniards want to be more flexible. They do not want to commit themselves; they want to be able to move easily for their work. And then it makes more sense to rent a house than to buy one. Because currently less than 20% of all homes are rental properties, we expect a lot of growth there. On top of that, just like in the Netherlands, the number of single-person households in Spain is rising rapidly; so there is simply more demand for housing.”

 

What are the returns on these investments for APG?

“In terms of rental income, we assume 3 to 4% cash return per year. Low?  Not really. Now that interest rates are so extremely low, and we don't earn much on bonds, for example, that’s an excellent return. On top of that there is the expected annual revaluation of the real estate. As a result, this investment has an attractive total return every year.”

 

What is APG's strategy, when it comes to investing in real estate? 

“We focus on a portfolio of global real estate investments that offers predictable returns. In doing so, making our properties more sustainable is a top priority. We invest not only in rental properties, like we do in Spain, but also in shopping centers, outlet centers, offices, distribution centers, hotels and student housing.”

“Making our real estate more sustainable is a top priority for us”

Wouldn’t it be better for APG to invest in Dutch rental properties so that our retirees can benefit from them as well?

“We certainly do that too. For example, through our interest in Vesteda, which owns over 27,000 Dutch rental homes. But in the interests of our members, it makes sense for APG to spread the investment risks as widely as possible. After all, that gives the best chance of stable returns in the long term. And that includes investing in real estate worldwide, not just in the Netherlands.”

 

Vivenio invests in some 6,000 homes. Are these the more expensive rental properties, or does that also include some social rental properties?

“It’s a mix. Spain does not have social housing as we know it in the Netherlands. For some of the rental properties, the possible rent increase is limited by the government, to protect the position of the tenant. We do include some of these in our investments, but the majority of what we invest in is in mid-range houses, with an average rent of 840 Euros per month, ranging from 1400 Euros at the top and 400 Euros at the bottom end of the scale.”

 

Are these relatively high rents by Spanish standards?

“Not really. A relatively high number of highly educated people live in the big cities and have good jobs. In most households, both partners work, so those rental fees are affordable for them.” 

 

What does APG do as a homeowner? Do you refurbish rental properties?

“Wherever possible, Vivenio adds value to the residences by building additional facilities. Such as an extensive gym and other sports facilities, rooftop terraces, spaces for flex offices for tenants who also want to be able to work from home, etc. Vivenio tries to be efficient with the space it has available in order to offer as many facilities as possible to its tenants. For example, by converting former retail spaces or office spaces.”

 

Is sustainability a priority?

“Absolutely. Vivenio participates in the Global Real Estate Sustainability Benchmark (GRESB). This is an international real estate benchmark that assesses the sustainability performance of real estate portfolios. For individual rental properties, BREEAM is the most commonly used assessment method to determine the sustainability performance of buildings.  The building materials used or the energy consumption, for example, are considered in this assessment. According to this assessment, Vivenio’s recently built rental properties score ‘good’ to ‘very good’. In addition, together with our internal Global Responsible Investments team, we are constantly looking for opportunities to raise the bar.”

 

What effect did the Covid-19 have on APG’s investments in Spanish rental properties?  

“In the beginning, people stopped spending money, but that soon changed. We then immediately said that if tenants could no longer pay the rent because they no longer had a job, we would not immediately throw them out into the street anyway. We felt it was important to treat our tenants in a socially responsible way and to make arrangements for this group. In the end, that turned out not to be needed.” 

 

You outlined the advantages of this Vivenio investment, such as the stable returns earlier. So why are you selling half of this equity stake?

“In the beginning, we had the ambition to grow this housing platform to a certain scale. Vivenio is now well on its way, but there is still room for further growth, becoming more efficient and ultimately delivering better returns. By admitting a new investor, more capital is available to achieve that growth and APG can cash in on part of this investment. We chose pension investor Aware Super, with whom we already work well in other investments, such as that in aparthotel chain City ID. The return is more than 400 million Euros, giving us nice total return. We have therefore met our return requirements. My coworkers and I are quite proud of that. We are reinvesting the proceeds partly in Vivenio, and partly in other real estate investments.”

 

Do your Spanish roots help when working with Vivenio and on a deal like this?  

“Haha, I was born and raised in the Netherlands, but yes, I do have Spanish relatives. The fact that I speak the language fluently is useful; it quickly breaks the ice. But for the rest all communication is in English, which is nice for my APG coworker. Culture clashes? Not so much. It is obviously not an Anglo-Saxon negotiation culture like we encounter with other investments, but that can also be a good thing. And the Spanish lunches are a relief, compared to the Dutch cheese sandwiches with milk.”   

Volgende publicatie:
2020: Pressing ahead with sustainable ambitions

2020: Pressing ahead with sustainable ambitions

Published on: 30 June 2021

APG publishes Responsible Investment Report

 

In 2020, APG has once again made great strides when it comes to responsible investing. By continuously improving, we can continue to meet the growing sustainable ambitions of our pension funds, as shown in our Responsible Investment Report (Dutch; English version expected in July) published today.

 

Responsible investing is one of APG’s strategic pillars. In their preface, Annette Mosman (CEO), and Ronald Wuijster (board member responsible for asset management) note that the Covid crisis has accelerated the increased attention for responsible investing. "Not only among NGOs, but also in the media and among the participants of the pension funds for which we work. We listen carefully, because we realize that our right to exist derives from the participants. It is for them that we work towards a good pension."

 

Investing in sustainable development

By the end of 2020, we had invested over €90 billion on behalf of our pension funds in companies and projects that contribute to the Sustainable Development Goals (SDGs). These were drawn up by the United Nations in 2015 to create a better and sustainable world. Our pension funds ABP and bpfBOUW both have a target for investing in the SDGs. A significant part of our investments in the SDGs (€12.2 billion) consists of labeled bonds. These are bonds issued by companies, governments and organizations to finance green, social or sustainable projects.

 

In 2020, APG, together with three international investors, established the SDI Asset Owner Platform to stimulate investing in the Sustainable Development Goals. Our ambition is to make this a global standard. In this way, we - together with other responsible investors - can contribute to goals such as sustainable cities and communities, affordable and clean energy and climate action.

 

Combating the Covid-crisis

By the end of 2020, APG had invested more than € 1 billion in so-called Covid bonds on behalf of pension fund clients. The proceeds of these bonds are used to combat the pandemic and the impact of the lockdown on people and businesses. Examples include the expansion of health care services, employment retention programs and support for SMEs.

In 2020, we also urged companies – both individually and together with other large investors – to mitigate the social consequences of the crisis and put employees’ health first. According to the U.S. organization Responsible Asset Allocation Initiative, APG is among the global asset managers that do the most to address the effects of the pandemic.

 

The carbon footprint of our equity investments decreased by 39% against the 2015 base year.

Global warming and the energy transition

The carbon footprint of our equity investments decreased by 39% against the 2015 base year. All our pension funds have a carbon reduction target. This year, for the first time, we also publish the carbon footprint of our corporate bonds, real estate and private equity investments (57% of the total portfolio). By 2022 at the latest, our pension funds will link these to 2030 climate targets. APG has contributed to a framework for reporting carbon impact as well as an overview of methods used by the Dutch financial sector for measuring the carbon footprint.

 

At the end of 2020, we invested €15.9 billion on behalf of our pension funds in the Sustainable Development Goal 'Affordable and Clean Energy' (SDG 7). By investing in this goal, we reduce climate risks in our investment portfolio and contribute to the energy transition.

 

Impact on risk and return

In 2020, we developed a method that provides insight into the effect of including (taking sustainability aspects into account in each investment decision) and excluding investments on the return of the equity portfolio. Over the past two years, the effect has been marginally positive. We do note that we can only make statements about the long term if we have measured over a longer period of time. In 2021, we will also develop methods to assess the impact of other instruments for sustainable and responsible investing on risk and return, such as carbon footprint reduction and investing in the SDGs.

 

Our own business operations

Although APG can achieve the greatest impact with the investments we manage for our pension funds, we also take into account our own business operations. We can only set a high bar for companies in which we invest, if we do the same for ourselves. In this way, we also motivate employees to consider sustainability in their daily work and choices. By 2030, APG wants to have a demonstrably climate-neutral business. In order to enable decision-making on our sustainable ambitions, we will establish a Sustainability Board under the leadership of CEO Annette Mosman. More on this in our annual report.

 

Sustainable future

APG invests over €570 billion on behalf of its pension fund clients ABP (government and education), bpfBOUW (construction), SPW (housing associations) and PPF APG, the pension fund of our own employees. Our pension funds have strengthened their responsible investing ambitions and objectives. ABP announced its new policy in 2020; bpfBOUW and SPW have recently done so. In line with our clients’ increasing ambitions, APG continues to develop in the area of responsible investing. We want to 'work together on your sustainable future'. A future with a good and affordable pension, in a sustainable, livable and inclusive society. That is what we are committed to, now and in the future.

Volgende publicatie:
APG awarded twice during Global Capital Bond Awards

APG awarded twice during Global Capital Bond Awards

Published on: 18 June 2021

APG's Credits team garnered two awards during GlobalCapital’s Bond Awards ceremony. APG took second place in the Most Influential Investor in Corporate Bonds category, moving up one spot from last year. And for the first time ever, APG placed in the financial bonds category, where the Credits team came in third.

 

The Bond Awards rankings are based on a poll among various players in the bond market, such as issuers, investors and banks. Each year participants cast a vote for the best performing players in different categories. "That is the reason why we are especially proud," Tim Slütter, Head of EU Credits, explains. “The award truly is an acknowledgment from our colleagues working in bond markets around the world."

Rinse Boersma, portfolio manager financial credits, thinks that APG owes its nominations to the transparency that the pension provider stands for. “Especially in times of COVID, the market was very volatile. Companies and banks needed financing but got a cold shoulder. APG has always been very forthcoming about what we buy for what price. That reliability is important.”

 

Oscar Jansen, portfolio manager corporate credits, thinks that APG's leadership in the field of ESG was also beneficial in getting awarded. “Green bonds, social bonds, there are more and more of them. For companies that bring these products to the market, it is important that you provide clear and substantiated feedback. APG is at the forefront of this.”

 

In the corporate bond category, investment manager BlackRock came in first. Pimco came in third place. In the financial bonds category, it was a matter of trading places. In this category, Pimco took first place, BlackRock came in second, while APG came in third. Tim Slütter: "Of course APG is a sizable candidate too, but compared with these parties we are almost punching above our weight. We are proud that we can compete with these kind of world-class players."

 

GlobalCapital is a news and data service for international professionals working in the capital markets. It has hosted the Bond Awards for twelve years. More information about the Bond Awards can be found here: Welcome to the GlobalCapital Bond Awards 2021! | GlobalCapital

Volgende publicatie:
“Transition to wood construction won’t happen overnight”

“Transition to wood construction won’t happen overnight”

Published on: 16 June 2021

APG is investing in over eighty thousand hectares of FSC-certified Chilean production forest. How do you arrive at such an investment? What does the market look like? And how does logging relate to sustainability? Six questions for Vittor Cancian, Senior Portfolio Manager Natural Resources at APG.

 
Why is APG investing in timberland?

“For an investor with sustainability ambitions, timberland is attractive because responsibly managed forests make a demonstrable contribution to achieving the Sustainable Development Goals. After all, trees absorb CO2 and FSC-certified timberland contributes to biodiversity.” 


From a return and risk perspective, timberland is a good investment for a pension fund because the return grows with the general price level. It therefore offers a natural hedge against inflation. Pension funds aim to have pensions grow in line with inflation as much as possible. So, it helps if the return on your investments also rises with the general price level.


Another advantage of timberland is that it adds diversification to your overall investment portfolio. The prices do not move much with developments in financial markets, as is the case with shares or bonds. So, if stock markets give slightly lower returns for a while, this need not apply to timberland investments. These two advantages – a hedge against inflation and diversification - also apply to farmland investments, for that matter.


The beauty of timberland is also that, depending on the market price of wood, you can delay or speed up the decision to cut trees. If in a certain year the price of wood is too low, you can wait for a better time to sell. The advantage is that the trees will continue to grow in the meantime, increasing their economic value. Or you can sell sooner if the price is right.

 

Would it not be even more sustainable to leave those trees growing in the forest?

“We only invest in production forests. That implies that at some point you also decide to cut the trees down. All our investments in timberland are managed in accordance with the FSC or a comparable quality mark. You only get this certification if you manage forests in a sustainable way. This includes the obligation to plant a new tree for every one that you cut down.


An older tree represents a higher economic value than a young tree. In addition, the CO2 absorption of older trees is flattened because they no longer grow as much. So, from a financial point of view, but also looking at the reduced CO2 absorption, it makes sense to cut down these trees and sell the wood.  Young trees, on the other hand, grow fast and need CO2 to do so. Selective felling and replanting therefore keeps the lungs of the earth vital. FSC certification also requires that you take care of biodiversity and pay attention to the social and economic impact on the area in which you operate.”


Wood construction is on the rise. Doesn't that also make a sustainability contribution?

If you start using wood construction as an alternative to concrete and cement, it definitely provides a sustainability advantage. The CO2 absorbed by trees is stored for a long time. The production of concrete and cement, on the other hand, produces a relatively large amount of CO2 emissions. If you really included that in the price, there would be a more financially favorable business case for wood construction.


We are seeing a development to build more with wood. In 2019, the world’s tallest wooden building opened in Norway (the Mjøstårnet in Brumunddal has 18 floors and is 85.4 meters high, ed.). In Amsterdam Oost, Hotel Jakarta is a good example. By 2025, one in five new houses in Amsterdam must be made of wood. But the construction industry is quite conservative.  The transition to more wood and less concrete will not happen overnight.


Exactly what kind of wood are we talking about and where is APG investing?

“In our timberland investments, we are dealing primarily with two wood types: softwood – such as, for example, Radiata Pine in Chile, Australia and New Zealand, and Douglas Fir in the US – and hardwood. The latter is primarily Eucalyptus but also other types, like Black Cherry and American oak for the furniture industry. Softwood is used primarily in construction. Eucalyptus wood is also used in the pulp & paper industry.


Will there be more investments like the one in Chile?

“That is our expectation. We are now moving towards a strategy in which we want to expand the current 1.8 billion Euros in timberland and agriculture to 3-5 billion Euros. The rest of the Natural Resources portfolio will gradually be phased out in a responsible way.


To find these kinds of investments, we doubled our team. These new people are based in Hong Kong or New York. It is important that they are close to the market. They have to feel the local dynamics and have their own local network. This is not only important for selecting the right investments, but it is also easier to manage such investments if you are close by. COVID-19 makes this a little more difficult at the moment, but we normally always go and have a look on site if we have our eye on an investment such as in Chile. We want to see the organization, the management and all the other aspects you want to assess to see what we are getting into.”


One of APG's co-investors in the Chilean forest said he had been looking for a promising investment of this size for almost a decade. Is there enough timberland to be found that meets your requirements, to be able to invest those extra billions?

“Yes, but opportunities to invest in timberland and access to the market vary from country to country. Australia and New Zealand, for example, have a well-developed timberland sector, with sufficient scope. Those markets are easily accessible for an investor and offer enough opportunities. In other countries it is a bit more difficult because the markets there are not yet so developed. In countries like that you often have to be more proactive and create a certain structure in order to be able to invest in timberland. Our investment in Chile is a good example. Together with two other parties, we set up a joint venture that acquired this production forest from Arauco.


Chile also has a well-developed timberland sector, but it is mainly owned by a few large companies that supply wood products to the construction industry - for example, MDF or OSB (both pressed from residual wood, ed.). To be assured of sufficient wood for their production, they also want to own the forests. So, they are reluctant to sell them. Arauco is one of those companies. But now the situation arises that these companies need capital to further invest in new production facilities. In order to get that, they sell sections of their forests to large institutional investors - often with the obligation to deliver a certain part of the wood to them annually. At the prevailing market price, of course. A great opportunity, in other words. The scope - this joint venture will be Chile’s third-largest timber producer - and the quality of the FSC forests Arauco have brought to the market are special, so the competition for this transaction was fierce. APG started investing in timberland back in 2007 so we are experienced in this sector by now. The same goes for our partners. We were therefore able to form a strong consortium fairly quickly and strike while the iron was hot.”

Volgende publicatie:
European Investor Association EFAMA appoints Peter Branner as vice president

European Investor Association EFAMA appoints Peter Branner as vice president

Published on: 14 June 2021

Peter Branner, Chief Investment Officer at APG Asset Management, has been appointed vice president of the European Fund and Asset Management Association (EFAMA). A new board of directors was elected during the annual meeting of the trade association for the European asset management sector. The board consists of Naïm Abou-Jaoudé (president) and Joseph Pinto, who will also fulfill the role of vice president.

 

Abou-Jaoudé is chief executive officer at the Belgian asset manager CANDRIAM, the former Dexia Asset Management. Pinto holds the position of global chief operating officer at France’s Natixis Investment Managers. EFAMA's members collectively represent EUR 27 trillion in assets under management.

 

Critical part to play
The appointment of the new EFAMA Board is for a period of two years. Commenting on his appointment, Abou-Jaoudé emphasizes that in addition to their financial goals, European asset managers now also have a critical part to play in encouraging a more sustainable and inclusive future.

 

 

EFAMA press release

Volgende publicatie:
APG and KPN launch fiber optics company Glaspoort

APG and KPN start fiber optics company Glaspoort

Published on: 9 June 2021

APG and KPN today completed the transaction to launch a joint venture in fiber optics: Glaspoort. The new Amsterdam-based company will now begin to roll out fiber optics in villages, small communities and business parks. The scope of the joint venture has increased by 75,000 households. This will enable 750,000 households and 225,000 businesses to get connected to fiber optics by 2026.

 

Over the next five years, Glaspoort will be investing over 1 billion Euros in rolling out fiber optics. Thanks to sufficient construction capacity and external financing, Glaspoort can have a quick start. More than 70,000 fiber optic connections are expected to be added this year. The name Glaspoort refers to fiber (glass) and port, as the gateway to the digital future. 

 

Many advantages

The past year underlined the importance of reliable, safe and fast internet for Dutch society. In the next few years, nearly 1 million customers in more remote areas will have the opportunity to enjoy the benefits of a fiber optic connection. The required construction capacity will create more than 1,000 additional jobs.

Patrick Kanters, Managing Director of Global Real Assets at APG, is pleased with the formal launch of Glaspoort. “We look forward to building the new company with KPN and enabling the rollout of fiber optics to nearly 1 million customers. This joint venture will make a significant contribution to the Dutch digital infrastructure. It is also expected to generate attractive returns for our pension fund customers. The rollout will also contribute to energy savings. After all, fiber is more energy-efficient than copper or cable.”

 

Nearly national fiber coverage

“This transaction creates additional value for all stakeholders,” KPN CEO Joost Farwerck tells us excitedly. “Thanks to the expanded scope of the project, even more villages can be connected to state-of-the-art fiber infrastructure at an accelerated pace.” Combined with KPN's own rollout of about half a million households per year, this will result in nearly national fiber coverage (80 percent) by 2026. A result that would otherwise not be achieved until much later. Farwerck: “With 5G, fiber will provide the most modern and powerful network, which will support the Netherlands well into the 21st century.”

 

Open network strategy

The new network company has an open network strategy. Although KPN acts as the main tenant on the network, Glaspoort offers access to external operators who opt for this. End users can therefore select a telecom company of their choice. This will promote competition and innovation in the Netherlands.

 

Jan Willem Scheerder and Ferry Niers have been appointed as respectively CEO and CFO of Glaspoort. Scheerder previously held various executive positions in Wholesale Services and International Carrier Business and led several start-ups. Niers has over 14 years of experience in the TMT industry and held Corporate Finance and M&A positions at KPN and KPMG.

 

Also read: Why is a pension investor investing in fiber optics technology?

For more information about Glaspoort, visit: glaspoort.nl

Volgende publicatie:
“Does Brexit offer any opportunities for pension investors?”

“Does Brexit offer any opportunities for pension investors?”

Published on: 21 May 2021

How do we keep our British economy interesting to foreign investors now that Brexit is a reality? With that question in mind, UK Trade and Investment Minister Gerry Grimstone launched the "Investment Council" at the end of April. This is an advisory body consisting of directors of forty large international companies from various sectors: from Airbus to Kraft Heinz, from Deutsche Post to Hewlett Packard and Morgan Stanley. The only Dutch participant, Gert Dijkstra sits on this Investment Council on behalf of APG. The think tank advises the British government on how the UK can remain an interesting market for foreign investors, for example in terms of legislation and tax rules.  So that they do not turn their backs on the United Kingdom and British jobs are preserved.

Is the UK, which has isolated itself with Brexit, still an important market for a pension fund to invest in?

Dijkstra: “Absolutely. The British economy is still among the global Top 5, even after Brexit. It is an open and well-regulated economy that is very accessible to us, also because of the language. On top of that, the British have had extensive experience with privatization since the 1980s, led by Margaret Thatcher at that time. This means that they are very familiar with public-private partnerships, a construction that we often like to use. On behalf of our clients, we have been investing in the United Kingdom for some twenty years. We have built up good contacts, including at the British Embassy and the Ministry of Commerce. The British, in turn, find us an interesting discussion partner, partly because together we have invested some 35 billion Euros in the United Kingdom.”

Invested in what?  

“APG has invested in hotels like CitizenM, ports, rental and owner-occupied housing, among other things. And we also invest in shopping centers and all kinds of infrastructure, such as wind farms and London’s water company. We also continued to invest during the Brexit negotiations, such as in homes in London and a large shopping and recreation center in Edinburgh.” 

What is the average return on all those British investments?

“I don’t know exactly; that is not how we look at it. We don’t compare returns between countries or regions, but between themes or sectors. But in general, the long-term returns are good.”

   

Is Brexit unfavorable to a pension investor like APG? 

“At first glance, yes: we are pre-eminently a long-term investor that benefits from calm, certainty and predictability. Well, you can forget about that with such a drastic exit from the EU. We were not excited about that at all. An additional disadvantage is that we really have lost a ‘buddy’; in our pension lobby in Brussels, they were often on our side because their pension system was similar to ours. They often advocated the same interests to the EU as we did.”

 

Will Brexit make the prices of potential investment assets go up, and will you not be affected by new regulations?

“The process of the UK leaving the EU has caused short-term price fluctuations of - potential - investments in the UK currency. First they fell, then they rose. In the long term, this will average out to realistic market prices. So far, I have seen no signs that new regulations are preventing us from making investments in the UK.”

As investors, we hope for an atmosphere in which we feel welcome to enter the UK market.

Does Brexit have any advantages for a pension investor like APG?

“Certainly. Every disadvantage has its advantage including in this case. For example, because the British government is going to invest heavily in things like renewable energy, mobility and infrastructure. For almost every investment this rule applies: preferably as sustainable as possible. Exactly what we’re aiming for. For example, they want to invest four billion British pounds in inter-city transport, such as roads and railroads. And within the telecom market they are going to invest in both cables and fiber optics, where we are also seeing opportunities; see also our recent joint venture with KPN, for the installation of fiber optics in the Netherlands.”

  

Is it pleasant for foreign investors like APG to negotiate with the British now that they have isolated themselves through Brexit?

“Yes, I can’t deny that. We can negotiate in quite a relaxed manner, although we are not the only foreign investor, of course. The British understand that they need to stay focused on their business, make new trade deals and re-establish contacts. They want to reaffirm or rebuild relationships. The creation of such an Investment Council fits in well with that. Getting advice from big investors and companies from abroad and finding out what they think is important is a really smart move. In this way they create more cohesion. For APG, our participation in this Investment Council means that we are in the front row when new investment opportunities arise.”

 

You just finished the first meeting of the new Investment Council. What points did you bring to the table?

“I outlined that predictable government policy is crucial for us as long-term investors. Secondly, that on behalf of our clients we are making a move towards increasingly responsible and sustainable investment; and we therefore take this into account in our investment policy. And third, that we benefit from a good climate for entrepreneurs. If they are stimulated to take initiatives, we get more opportunities to invest. Ranging from small start-ups to very large companies and initiatives. Most of the other participants had similar points, with the desire to invest sustainably in particular really being a common thread. As investors, we hope for an atmosphere in which we feel welcome to enter the UK market. Including in terms of fiscal options.”  

 

Finally, on what issues do you see the biggest challenges now in terms of investing in the UK?  

“For us, a stable political environment and consistent government policies are important, with a clear role for long-term institutional investors. For example, you can see that the current government is now rolling back privatization, including in the area of public transport. Secondly, I expect competition with large investors that should not be underestimated.”

Volgende publicatie:
APG supports Shell’s climate strategy and encourages further steps

APG supports Shell’s climate strategy and encourages further steps

Published on: 18 May 2021

Shell is aiming to be a net-zero emissions energy company by 2050. In order to realize this objective, Shell has tightened its climate targets for the short and medium term. These important topics were on the agenda of Shell's shareholders’ meeting on May 18th

 

Reduction of CO2 emissions is an important element in the Responsible Investing policy of APG’s pension fund clients. APG, on behalf of its clients and together with other major investors, has therefore had many intensive discussions with oil and gas producers, including Shell, throughout the years. Partly because of these discussions, Shell has tightened its targets and has linked them to the remuneration of top managers. Based on these positive steps, APG has voted in favor of a resolution submitted by Shell at the shareholders’ meeting, in which Shell offered its shareholders the possibility to directly express their support or criticism with regard to the company’s energy transition strategy. At the same time, APG will continue to critically monitor Shell's progress in this area.

 

What (tightened) climate goals is Shell proposing?

In early 2021, Shell took further steps by announcing its objective of becoming a net-zero emissions energy company by 2050. This is an absolute CO2 target, which includes all emissions: not just the emissions by Shell itself, but also the emission released when customers use the company’s energy products (such as petrol). The company also tightened its intermediate short and medium-term CO2 intensity targets. In order to achieve these, Shell is looking to cooperate with customers to reduce their dependence on fossil fuels and, with that, also lower its own total emissions. This is the way for Shell to truly have a global impact: it's not just the supply of fossil fuels that will have to be lowered, it’s also demand.

 

In addition, Shell increases the weight of climate goals in the remuneration of its top management. Lastly, and this is new for oil and gas companies, Shell has announced that, as of 2021, it will offer its shareholders the possibility to cast an advisory vote on its energy transition strategy. Although a lot of work still needs to be done by the entire oil and gas industry – including Shell – the company assumes a leading role within the industry.

 

What does APG require from Shell?

During our discussions, we have asked the company to give climate goals a larger weight in the remuneration structure. Here we notice the result of our efforts. The same goes for the emissions reduction targets and asking shareholders for an advisory vote. All of the above shows the value of the constructive discussions of the past years between Shell and shareholders united in the Institutional Investors Group on Climate Change (IIGCC) and Climate Action 100+, of which APG is a member on behalf of its pension clients.

 

Previous strengthening of Shell's ambitions has been followed by other oil and gas companies. This is something APG again wants to achieve in the discussions with the other companies in the industry. We hope this announcement will once again create a domino effect.

 

We also see that a lot still needs to be done. We want Shell to anchor its climate policy better within the investment plans for the energy transition, such as investments in hydrogen, infrastructure for charging electric cars, and bioplastics. We also have questions about the feasibility of compensating measures, such as the planting of trees and the capture and storage of CO2. Shell will have to demonstrate that the execution of its strategy leads to results. As a critical shareholder of Shell and other oil and gas companies, APG will be monitoring this process closely.

 

Follow This

Like in previous years, the agenda of Shell's shareholders’ meeting included a resolution of Follow This. This is a group of shareholders also urging oil companies to contribute to the implementation of the Paris climate agreement. At the shareholders’ meetings of US oil companies ConocoPhillips and Phillips 66, APG recently voted in favor of the Follow This resolutions, which were adopted by a majority of votes.

 

At Shell’s shareholders’ meeting, APG abstained from voting on the Follow This resolution: we didn't cast a vote in favor nor a dissenting vote. On the one hand, we agree with the underlying goal of the Follow This resolution, which is that Shell sets objectives in line with the Paris climate agreement and adjusts its operations accordingly. On the other hand, we have a different perception of how this should be accomplished.

 

There are several roads leading to Paris

The Follow This shareholders are of opinion that Shell's strategy is not in line with ‘Paris’. They require Shell to set targets of which it can prove that they will lead to a specific, absolute reduction of emissions in the short and medium term. This is one interpretation of the path towards climate-neutral operations. In practice, there are several roads leading to Paris. We believe this specific elaboration of ‘Paris’ should not be imposed on Shell. Shell has set targets in line with the Paris climate agreement for the short, medium and long term and we continue to monitor them critically.

 

 

 

 

Volgende publicatie:
APG increases stake in Italy’s gas infrastructure

APG increases stake in Italy’s gas infrastructure

Published on: 28 April 2021

APG has increased its stake in 2i Rete Gas thereby contributing to the decarbonization plan of the Italian economy. The company operates in the gas network management, dispatching and marketing.  

 

“We are pleased to continue investing, on behalf of our pension fund clients, in 2i Rete Gas alongside our partners Ardian and F2i,” says Carlo Maddalena, Senior Portfolio Manager of APG. “We look forward to supporting jointly this critical infrastructure which contributes to the decarbonization plan of the Italian economy. 2i Rete Gas will play a key role as enabler for the energy transition towards hydrogen and renewable gases while delivering long-term returns for our pension fund clients.”

 

APG is invested in 2i Rete Gas through a vehicle, called Finavias, where AXA is also shareholder. Finavias goes from owning 28% to 36%. APG’s direct stake in 2i Rete Gas increases from 17% to 22%.

The company boasts approximately 4.5 million customers across the country, a turnover of € 718 million at the end of 2020 and 2.000 employees.

Volgende publicatie:
Korean steel producer stops in Myanmar after pressure from APG

Korean steel producer stops in Myanmar after pressure from APG

Published on: 16 April 2021

South Korean steel producer Posco C&C today announced it will terminate its cooperation with a company controlled by the military in Myanmar. APG is invested on behalf of the pension fund clients - including ABP, bpfBOUW and SPW - in the parent company of Posco C&C. The announcement follows strong pressure from APG and other investors to cut ties with the junta.

In the Financial Times, Yoo-Kyung (YK) Park, sustainability specialist at APG, says this is ‘fantastic news’. In contacts with management and in a public appeal in a major newspaper, we have urged that the company end its cooperation in Myanmar.

“We are pleased to see that Posco has listened to the concerns we have raised on behalf our pension fund clients and together with other investors,” says YK. “In the past six months in particular, the company has implemented corporate responsibility improvements. Today's announcement is another step in the right direction.”

Pulling the plug

Posco C&C is pulling the plug on its joint venture with a military-controlled company, Myanmar Economic Holdings Limited (MEHL). Earlier, Posco C&C announced that it would stop paying dividends that financially benefit the military.

Since mid-February this year, Myanmar is controlled by a military junta after the army overthrew Aung San Suu Kyi's government. The military has violently suppressed protests against the coup. APG and its pension fund clients find this situation extremely worrying.

APG invests in some global companies that operate in Myanmar and may have business or financial ties with the military. We have been engaging with our investee companies on this issue for some time – also already prior to the military takeover.

In February, Japanese brewing company Kirin announced that it was ending two joint ventures with companies that may have ties to the military in Myanmar. Here too, APG had been urging the company to terminate this cooperation before the military coup.

Importance of human rights

In addition to financial criteria, we consider ESG-criteria – including human rights – in all our investment decisions. We have conveyed our great concerns to all investee companies that operate in Myanmar. We also ask them to reconsider their position in the country.

APG does not invest in government bonds of countries, such as Myanmar, that are subject to a binding weapons embargo imposed by the UN Security Council or the European Union.

Volgende publicatie:
Bitcoin pension

Bitcoin pension

Published on: 15 April 2021

Early retirement thanks to the Bitcoin. Someone in my circle managed to do just that. In particular the price explosion as of last summer was a major contributor. Would this be an idea for pension funds? APG has received some media questions on the topic over the past few weeks. This resulted in articles, concluding that major investors still hesitate.

 

Please pay attention to the word ‘still’. Is it just a matter of time? I will get back to you on that one. Let's first take a look at the investment approach of pension funds. The goal is to provide participants with a good pension. An important question is the amount of investment risk you are willing to take. Avoiding all risks leads to a pension that's quite certain, but also quite low. Accepting more risk leads to higher pensions on average, but also to a greater 'variety’ surrounding it. The ultimate investment policy has to match the needs of the participants.

 

Are Bitcoins a good fit? The price movements are rather substantial. This has very likely disturbed the night's rest of the friend of a friend mentioned above. The price decreased by 70% or more three times in the past ten years. It eventually worked out well for her in euros and she can now catch some extra hours of sleep. My point is that you have to relate the phenomenal price increase to the huge volatility of the prices. When risk-adjusted, the reward over the past ten years is similar to the reward you get from a (50/50) portfolio composed of global shares and bonds (for the wonks: the Sharpe ratio is the same).

 

But it's all about the future. Do Bitcoins provide added value to a portfolio? In order to establish that, it is important to first determine the return expectations in several ‘weather conditions'. What is the so-called ‘investment case’? Where does the return come from? Just take shares or real estate for instance. Those sectors have recurring revenues - dividends and rental income - that move along with the economy or inflation. That's something you can count on.

To what extent the price is still able to rise is very hard to say

That doesn't apply to Bitcoins. There is no cash flow. It is therefore impossible to determine ‘fair value’ or expected returns. The return is determined entirely by the price trend of the Bitcoin. And as the supply barely increases, the price is primarily driven by demand. And what is it that drives the demand? Probably not buyers who are looking to use the Bitcoin as a means of payment, as that process is slow and expensive. That leaves us with: buyers who speculate on (further) price appreciation. But what is it that would trigger an increase of the price? Simple: it just does. That mechanism really exists. Increasing prices often trigger new demands and drive further price appreciation.

 

To what extent the price is still able to rise is very hard to say. Another 20%? A doubling? A tenfold increase? I don't rule out any of these possibilities. I can be a bit more precise on the timing of the peak. That will be once the bottom of the maximum width of the pyramid has been reached. As soon as the inflow of new groups of buyers comes to a standstill, the price cannot increase any more. If ‘Bitcoin-pensionados’ then want to pull out, the process may very well reverse (decreasing prices, increasing sales, etc.). Try to explain that as a pension provider to your constituencies and the regulatory body.

 

The Bitcoin will probably already tumble prior to the investment case, as it doesn't fit within the investment convictions. You cannot call the Bitcoin sustainable when you look at its considerable energy consumption. It is a bit pointless to have the energy provided by the new wind and solar parks immediately absorbed by the Bitcoin.

 

Returning to the word ‘still’, I think it will still take a while before the pension investors have overcome their hesitations. How long? Longer than it takes to build a pyramid.

 

 

Charles Kalshoven is Senior Strategist at APG

Volgende publicatie:
"Involve ESG objectives in remuneration policy"

"Involve ESG objectives in remuneration policy"

Published on: 14 April 2021

Senior corporate governance specialist of APG Asset Management Mirte Bronsdijk and head of investments ABP Diane Griffioen critically monitor the remuneration policy of companies. "Compensation policies should reflect the connection between financial and non-financial goals."

 

Read the full double interview (in Dutch) here.

Volgende publicatie:
New investment APG increases internet connections in Poland by almost a quarter

New investment APG increases internet connections in Poland by almost a quarter

Published on: 12 April 2021

This contributes to counteracting digital exclusion

 

Orange Polska and APG – acting on behalf of its Dutch pension fund clients – have signed an agreement to create a joint venture  that will operate a fibre network reaching around 2.4 million households in Poland  by 2025, mainly in the areas which lack infrastructure  today. The joint venture will operate under the name Światłowód Inwestycje, ‘Optical Fibre Investments’. This agreement contributes to making fast internet more accessible in Poland and counteracting digital exclusion. 

 

The joint venture will be 50% owned by Orange Polska  and 50% by APG. Orange will contribute around 0.7 million  fibre connections to Światłowód Inwestycje, including wholesale access to around 160 thousand customers who already use its services. Światłowód Inwestycje will roll-out 1.7 million fibre connections meaning that the network will cover 2.4 million households and will become the largest independent wholesale fibre operator in Poland. 

 

Julien Ducarroz, CEO of Orange Polska, said: “I am very pleased that we entered into a partnership with APG who shares our vision of the market potential of fibre infrastructure in Poland. Orange Polska has been conducting a very ambitious investment program during recent years, 5 million households across Poland are already within the reach of Orange Światłowód. The needs are still huge, and the pandemic has made them even stronger. Światłowód Inwestycje will help us cover the areas which still lack reliable internet access, without using the public funds. I am convinced that it will contribute to the development of the economy, digital infrastructure of the country and will fight digital exclusion.”

 

Poland is currently at the stage of development and creation of modern infrastructure, which is absolutely essential for increasing the competitiveness of the country's economy.  By partnering with APG, Orange Polska will be able to continue the rollout of fibre and contribute to the development of modern technologies in Poland. The 1.7 million of fibre connections will be a significant increase to the estimated 7 million existing fibre lines in Poland.  Patrick Kanters, Managing Director Global Real Assets at APG, said: “APG is excited to partner with Orange Polska to enable the roll-out of fibre connections to 1.7 million households in Poland. This joint venture supports APG’s ambition to enable the digitalization of the economy by providing high-speed fiber optic infrastructure to households that do not have high quality internet access today. Importantly, the investment is expected to deliver an attractive return for our pension fund clients.”

 

 

Światłowód Inwestycje will solely be a wholesale operator, meaning that Orange Polska and other third party operators will be able to access its network in order to offer retail services to their clients. Orange Polska, with its experience and technological background, will be the key technical partner providing network construction and maintenance, lease of network elements network, as well as other support services.

 

“The agreement confirms that Orange Polska is the leader in innovative, business approach to fibre network rollout - Maciej Nowohoński, Orange Polska management board member in charge of carriers market stated. – “Światłowód Inwestycje is a new business model, based not only on strong demand for fast internet in Poland, but above all on unique expertise and experience of Orange Polska in developing fibre infrastructure and providing fibre services. This is a project that will bring benefits for all - customers, operators and the entire telco market in Poland – he added. 

 

The transaction is expected to close by the end of August 2021. Proceeds from the transaction will significantly strengthen Orange Polska balance sheet and will be an important element of the new strategy that will be announced in 2Q 2021.

Volgende publicatie:
“Selling in panic never is the smart thing to do”

“Selling in panic never is the smart thing to do”

Published on: 1 April 2021

Ronald Wuijster on investing in a Corona year

Despite the Corona crisis and the associated correction on the stock market, APG can still look back on an ‘excellent investment year’. Ronald Wuijster, member of the Board of Directors and responsible for Asset Management and HR, explains why. “We really had to work hard as an investor and many discussions have been raised. But we didn't make any changes to our long-term investment approach.”

How did APG perform in the field of asset management in 2020?
“Really good. We managed to achieve great returns for our customers, between 6.5 and 10 percent, and we recovered remarkably well in comparison with 2019. The results in the year 2019 were somewhat detrimental to the five years’ return. When we look back: the absolute return -the income realized from the market- was good in 2020, but a little bit lower in 2019. It is then up to Asset Management to earn additional returns above the market average, which is called excess return. We did not succeed in that goal in 2019, as we were below the market average in that year. However, the excess return in 2020 was really very good again and, as a result, the five years’ excess return also increased.”

More room was made in 2020 for investments in the Netherlands. Why was that? And what was that decision based on?
“APG is looking to emphasize its societal role in the Netherlands and contribute to the economy. That's not done by means of random investments. If you choose to invest in, for example government bonds, your contribution to the Dutch economy is rather limited. Moreover, there is sufficient interest in such investments which means it doesn't result in added value. Asset Management has therefore identified two areas in which we do make a contribution: infrastructure and venture capital. And the latter we invest in start-ups focusing on the energy transition, for instance, like our recent investment in NET2GRID. In addition to the social importance, making investments in the Netherlands of course has to meet the characteristics in the field of return on risk. That means we are certainly not investing in the Netherlands at all costs, but when a serious investment comes up that compares well with other market opportunities, it has a clear advantage.”

2020 has been a turbulent year in many ways. What is the overall conclusion as we look back?
“That we were able to maintain the good investment returns in the past year. And that truly makes me proud. We were startled by the stock market correction in the beginning of 2020: due to COVID-19, we experienced a sudden, sharp fall on the stock market. That fall caused commotion and concerns, sometimes with our customers as well. They witnessed the stock markets drop significantly and wondered whether we shouldn't be more careful. But from experience and good analysis we know it's not wise to slow down at a time like that. If you sell at a low level, triggered by fears of risk, you have to buy again at a high level once the stock market is recovered. That would be a shame. So, we maintained our long-term direction and purchased shares, according to our rebalancing policy, while the valuations decreased. In short, this means the following: when certain investment categories sharply increase or decrease, the allocations per category agreed with the customers is jeopardized. That means you have to purchase or sell: rebalancing. A correct decision.”

We know when to slow down or to accelerate

So, we escaped that stock market correction by sticking with the long-term direction. But does this mean Corona had no effect whatsoever on the investment strategy?
“Companies globally responded differently to Corona. Some companies benefited, others didn't notice any difference and a third group has really suffered from the crisis. To us, as an investor, it meant we had to work hard in some industries, such as hotels, entertainment and real estate. You may think about refinancing or having to apply special measures. We have had many discussions on these matters and were able to offer some help here and there, but we didn't make any changes to our long-term investment approach. What we take away from this crisis, is the knowledge that a certain event triggers trends that will last for a longer period of time. Think about growth in logistics and working at every location. That's something for us to respond to.”

APG sets high sustainability requirements to companies in which it invests on behalf of the funds. However, the administrator itself appears not to meet those requirements in all instances yet. What will be done about that?
“We set the bar high for others and, as a company, we also want to meet those requirements. But you will also notice that the hairdresser is not always cutting his or her own hair correctly. That obviously should not be the case and we have therefore prepared a plan to improve our own sustainability. We have implemented several programs to work on our mobility, diversity and inclusion, as well as financial self-reliance of participants in our pension fund customers. Our housing will also become more sustainable and we are exploring the new methods of working.”

Next for something entirely different. One of the themes in APG's new annual report: rewards. The total amount of variable rewards within APG increased significantly in 2020. How is that possible?
“That has to do with the number of employees in the domain in which the bonuses are paid. We have abolished the variable renumeration within APG, except for one specific group: employees bearing a very direct investment responsibility. That group consists of the portfolio managers and the team members have increased due our customers’ objectives, mainly in illiquid investments. 2020 has been an excellent investment year and was additionally positive in terms of our five years’ returns. The rewards are especially linked to the performances in the long term. And good investments are beneficial to the customers and the consumers and activate the variable reward system.”

 

APG usually states that it mainly pays variable remunerations to employees who work in one of APG's foreign offices. Is that still the case?
“We have a group of employees in the Netherlands who are bearing a direct investment responsibility. However, that group only receives 15% of the variable remunerations. 85% of the amount is therefore paid in the Unites States and in Asia where variable remunerations are customary in the rewards structure applicable to those continents.”


The members of the Board of Directors of APG have started to earn more on average, almost 30,000 euro per year. You have started earning even 66,000 euro more. What is the reason for this increase in salaries of the members of the Board of Directors and of you in particular?
“As far as I am concerned: the agreement has been made at the time of my appointment that upon adequate functioning my salary would increase to a pre-agreed level after two years. The Board of Directors has determined last year that my functioning is of a very good level which explains the increase. The other increases relate to, among other things, an increase in the Collective Labor Agreement (CAO), holiday pay of which the payment is lagging behind and some isolated cases, such as the parting of our Chief Executive Officer, Gerard van Olphen.”

And can this be justified now the country is suffering from such an enormous blow caused by the Corona crisis?
“The commitment and productivity of our employees have by no means been affected because of the Corona crisis. The realized performances have exceeded our expectations. In addition, APG did not have a business economic reason to reward differently. APG is not benefiting from Corona but is also not suffering. That applies throughout the organization. Moreover, a decrease in salaries would create uncertainties that would harm the economy. It is with good reason that the government has announced support programs for the industries that are struggling. So, preserving the salaries was the best thing for us to do, also in the interest of our economy.”

The new chairperson of the Board of Directors will not be earning the same salary as her predecessor? What are the underlying considerations for that decision?
“Annette Mosman will be earning slightly less than Gerard van Olphen. We consider the internal proportions when determining salaries -what does the average employee earn in relation to the chairperson-, the benchmark in the market and the societal aspects. Her salary is looking quite alright, a little lower at most, but she is also at the beginning of her term while Gerard had already been in service for a couple of years.”

Volgende publicatie:
APG makes new step towards carbon neutral investment portfolio

APG makes new step towards carbon neutral investment portfolio

Published on: 29 March 2021

APG is joining the Net Zero Asset Managers initiative (NZAM). The NZAM is a group of international asset managers committed to reach net zero emissions by 2050 or sooner. The initiative has a total of 73 signatories representing $32 trillion in assets under management, amounts to 36 percent of total assets across the globe. 

 

Specifically, APG promises to work in partnership with its clients on decarbonization goals, consistent with an ambition to reach net-zero emissions by 2050 or sooner across all assets under management; set an interim target for the proportion of assets to be managed in line with the attainment of net zero emissions by 2050 or sooner; and review this interim target at least every five years, with a view of ratchetting up the proportion of assets under management covered until all assets are included.

“APG on behalf of pension fund clients, is committed to contributing to the goal of the Paris agreement to keep global warming limited to 1,5 degrees,” says Peter Branner, Chief Investment Officer (CIO) of APG Asset Management. “The Net Zero Asset Managers initiative is completely in line with this ambition, which is why we are pleased to join the group. I am thrilled to see how our investment teams continue to identify climate-related investments in all regions in which we operate. It is encouraging in its own right and comforting for our clients to see that this happens without compromising return objectives.”

The Net Zero Asset Managers initiative is a group of international asset managers committed to reach net zero emissions by 2050 or sooner. Launched in December 2020, the initiative has rapidly grown and now has a total of 73 signatories representing $32 trillion in assets under management. This represents 36 per cent of total assets across the globe. 

APG’s pension fund clients already have climate-related targets for 2025, such as investing in clean and affordable energy (ABP: €15 billion) and reducing the carbon footprint in listed equities. Starting with the 2020 reporting cycle, APG and its clients will extend the scope of the carbon footprint disclosures to include corporate bonds, real estate and private equity. Together, these asset classes represent over half of our assets under management. The objective is to allow clients to set 2030 Paris-aligned climate targets no later than 2022.

We also actively partner with the broader investment community to share insights on climate-related risks and measurement. APG co-chairs the Net Zero Investment Framework (NZIF) which offers practical guidance for investors to align their portfolios with the Paris climate goals. Among other things, the framework defines principles and thresholds for targets on decarbonizing investment portfolios and investing in climate solutions. APG is also a founding member of the Partnership for Carbon Accounting Financials (PCAF). The goal of PCAF is to arrive at a shared methodology to enable financial institutions to assess and disclose the carbon emissions of their loans and investments.

APG’s commitment to net zero emissions in 2050 goes beyond merely reducing the carbon footprint of the investment portfolio, says Joost Slabbekoorn, senior responsible investment specialist at APG. “As a large investor, we have a broad set of tools at our disposal to drive lower emissions in the real world. This includes engagement, also together with other investors, to encourage companies we invest in to reduce carbon emissions and investing in climate solutions, such as renewable energy and carbon saving technology.” 

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APG contributes to an intelligent and cleaner energy chain by investing in NET2GRID

APG contributes to an intelligent and cleaner energy chain by investing in NET2GRID

Published on: 22 March 2021

APG announced today that it is investing in NET2GRID, a Dutch scale-up in the energy sector. For APG the investment in NET2GRID fits within its Dutch energy transition portfolio ANET. ANET’s goal is to support fast-growing companies and projects that contribute to the energy transition, to optimize long term returns and to maximize carbon reduction.

 

NET2GRID empowers utilities and energy retailers by providing actionable insights to their end customers based on the real-time analysis of their energy usage data. At the heart of NET2GRID’s product portfolio sit its cutting-edge Artificial Intelligence and Machine Learning technologies that deliver unique energy insights and energy consumption predictions.

 

“Real-time energy insight is becoming more important for consumers and utilities, creating more awareness of energy consumption and ways to become more energy efficient”, says Nienke Vledder, senior portfolio manager ANET at APG. “These insights help balance supply and demand of increasing renewable energy coming on-line, as seen in The Netherlands generated by – amongst others - wind and sun.

 

Please read the full press release Net2GR here.

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APG investments in Australian metropolitan rental apartments launched

APG investments in Australian metropolitan rental apartments launched

Published on: 17 March 2021

The joint venture that APG participates in to invest in Australian metropolitan new-build rental apartments, can start developing its first two projects. APG is founding investor for GAMV I (Greystar Australia Multifamily Venture I) and has already made a commitment of 350 million Australian dollars (214 million euros). Now that Canadian investor Ivanhoé Cambridge and Finland's Ilmarinen have also joined, the venture can invest up to 1.3 billion Australian dollars. This makes it the largest investor in this category of real estate in Australia.

 

GAMV I focuses specifically on the Australian build-to-rent sector. These are new build apartment blocks in world city centers, that have been designed and developed specifically for renters. The venture will develop it’s first two projects in central Melbourne before extending the portfolio to Sydney as well. Greystar plans to begin both of the first two projects this year, delivering 1,300 or more rental homes. As many as 5,000 dwellings could one day be held by the new venture.

 

World city centers
Graeme Torre, managing director of APG Asset Management Asia, explains why this market is so attractive: "This type of housing is already very well established in the centers of global cities outside Asia. In the United States, for example, BTR homes make up 11 percent of the total housing stock. In Australia, it's only 1 per cent. APG has been investing in the BTR sector for some time. In recent years, more and more institutional investors have become active in this market. In the United Kingdom, for example, the sector grew by 28 billion euros in the five years to 2019. APG has benefited from that popularity rise and in Asia we expect a similar development. That is why we finance the sector through partnerships in China, Japan and Australia, and investments in Greystar's operational platform in Asia.

 

We see it as simply a matter of time before the build-to-rent residential sector gains a foothold in all the key Asia-Pacific markets. So, it is no surprise to us that major investors such as Ivanhoe Cambridge and Ilmarinen have committed to the sector alongside APG in a sophisticated market such as Australia.”

 

Beyond economics

The strong conviction that APG has to this sector goes beyond just the economic attractiveness. Torre: “If we are all to have a chance of meeting climate goals, continued urbanization and more housing options are key requirements. ‘Build to rent’ is an essential asset class in meeting these requirements. This is one of the reasons why we have been actively targeting for increased exposure to the BTR-sector.”

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‘Net Zero’ framework helps APG deliver on clients’ climate ambitions

‘Net Zero’ framework helps APG deliver on clients’ climate ambitions

Published on: 10 March 2021

A group of 32 investors, including APG, has issued the ‘Net Zero Investment Framework’. It offers practical guidance for investors to tackle climate change and achieve net zero carbon emissions by 2050.

 

The Net Zero Investment Framework (NZIF) enables investors to align their portfolios with the Paris climate goals. In practical terms, this means that the investment strategy is made consistent with achieving a global target of net zero carbon emissions by 2050. The framework has been developed by over 110 investors through the Institutional Investor Group on Climate Change (IIGCC). APG is co-chair of this initiative.

 

Commitment to Paris climate goals

‘APG and its pension fund clients are committed to contribute to the goal of the Paris agreement to keep global warming limited to 1,5 degrees,’ says Joost Slabbekoorn, Senior Responsible Investment & Governance Specialist at APG Asset Management. ‘ABP, our largest client, has committed itself to a net-zero portfolio by 2050. This framework helps us deliver on those commitments.’

The framework defines principles and thresholds for targets on decarbonizing investment portfolios and investing in climate solutions, such as renewable energy, low-carbon buildings, and energy-efficient technologies.

In addition, the framework contains minimum requirements for investors to induce the companies in their portfolios to operate in line with the Paris Agreement.

It also recommends tools and methodologies for this purpose. This is done for overall strategy and asset allocation, as well as on asset class level for listed equity, corporate bonds, sovereign bonds and real estate.

 

Clients’ targets

APG and its clients already have climate-related targets for 2025, such as investing in renewables (ABP: €15 billion) and reducing the carbon footprint in listed equities (-40%). The framework helps us by combining these targets in a systemic framework that is comparable across the entire investment industry. It is intended for investors to adopt it on an ‘implement or explain’ basis.

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APG supports Partnership for Biodiversity Accounting Financials (PBAF)

APG supports Partnership for Biodiversity Accounting Financials (PBAF)

Published on: 4 March 2021

Cooperation aims to contribute to restoring biodiversity

 

APG – on behalf of its pension fund clients – supports the Partnership for Biodiversity Accounting Professionals (PBAF). The financial institutions in this partnership will develop a shared methodology for measuring and reporting the impact of their investments on biodiversity. Through their investments these financial institutions can take targeted action to protect biodiversity.

PBAF is an initiative of ASN Bank and a number of founding partners. Today it was announced that fifteen more financial institutions have either joined the platform or expressed their support. Their shared ambition is to measure their impact on biodiversity, be transparent about their impact reporting and to set targets to improve their ecological footprint.

Joint approach

Roel Nozeman, Senior Advisor Biodiversity at ASN Bank and chairman of the partnership, is excited about the new partners joining the platform. “A growing number of financial institutions realize that loss of biodiversity poses a major threat both to society and to the economy, and that we need action now. Through our investments, we can limit the damage to ecosystems and contribute to the protection and restoration of nature. To do so, we have to adopt a common approach to measuring our impact and using data. We will join hands with all new partners to continue developing that common approach.”

Biodiversity loss
Biodiversity refers to the variety of life on earth and to ecosystems, i.e. the systems that sustain this life, such as forests, soils and oceans. As it stands, the planet’s biodiversity is rapidly declining. This is bad news for nature but also for our future prosperity. Many economic sectors are dependent on the variety of plants, animals and insects in the world, either directly or indirectly. Examples are agriculture and fishing, but also (chemical) industries, real estate and transport. 

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“For Asian companies, a dialogue with shareholders is not self-evident”

“For Asian companies, a dialogue with shareholders is not self-evident”

Published on: 2 March 2021

Sustainability specialist Jaideep Panwar on APG's CO2 ambitions in South-East Asia

 

Coal-fired power stations are being closed all over Europe, but at the same new coal-fired power stations are being built in Asia to meet increasing energy demand. This contributes to global CO2 emissions, which are a key driver of climate change. As a large investor, APG wants to realize a transition within Asian companies: from fossil fuels to renewable energy. That requires subtle maneuvering, persuasiveness and a long-term approach, says sustainability specialist Jaideep Panwar.

 

July, 2020 – The Indian company Reliance Industries Limited organizes a shareholder meeting. Due to the corona crisis the meeting is a virtual one, for the first time in the company’s history. Jaideep Panwar, sustainability specialist at APG in Asia, is following the meeting behind his pc at his office in Hong Kong. Chairman Mukesh Ambani shares great news: the industrial conglomerate - active in the oil and gas industry and owner of the largest refinery in the world - wants to be CO2 neutral by 2035. The company plans to deploy clean technology to transform the emission of greenhouse gas into new products and materials. Panwar almost falls off his seat in amazement. APG – which has invested in the company on behalf of its pension fund clients - has been engaging with the management for over two years about a more ambitious climate policy. However, he could not have hoped for such challenging objective.

 

Asian economic growth leads to rising consumption of fossil fuels

Engaging with Asian companies on their climate ambitions is much needed. Although standards of living and per capita CO2 emissions in Asia are still (much) lower than in Europe and the US, economic growth in recent years has caused a considerable rise in the demand for energy and the consumption of fossil fuels in Asia. Coal-fired power stations are being used to generate electricity. China, India, Indonesia, Laos and the Philippines have announced plans to build new coal-fired power stations, according to the Global Coal Plant Tracker. Since 2000, Asian CO2 emissions related to the coal-fired coal plants have increased no less than 165%, according to data of the International Energy Agency (IEA). In that same period, European CO2 emissions by coal-fired power stations have actually decreased by 30%.

 

Long and winding road

In order to achieve the Paris climate goals (limit global warming to well below 2 degrees Celsius and preferable 1.5 degrees), a transition from fossil fuels to renewable energy sources (such as solar and wind) also has to take place in emerging economies. As a large responsible investor, APG wants to contribute to these goals by influencing the climate approach of companies in which it invests on behalf of its pension fund clients. Panwar and his colleagues are working on engagement each and every day: calling the management to account for their responsibilities in terms of the environment and society, conveying investor expectations and giving their view on how fast management should consider owning or investing in renewable energy sources instead of fossil fuels. Not an easy road to travel, it seems.

 

 

Is engagement in Asia different than in Europe or the United States?

“Asia is a continent with huge differences. On the one hand, there are emerging economies such as the Philippines, India and Indonesia, and on the other hand, there are wealthy and highly developed countries such as Japan and South Korea. Malaysia, Thailand and China are situated somewhere in between. However, in all these countries the same holds true: that is not that common for companies to enter into a dialogue with their shareholders, as has been normal practice in Europe and the US for many decades now. This means we have to make greater efforts in order to get our voice as a shareholder heard. Another characteristic of Asian markets is that certain families or the government often hold a substantial stake in companies. In this respect there are similarities with Europe. In the US, the UK and Australia, company ownership tends to be spread more widely.”

Control of Asian companies is thus often in the hands of the founding family or the government: how do you call them to account on their responsibilities?

What is working well and what is not?

“There is not one magic formula: every company requires a different approach and engagement is often a process that goes on for years. A forceful approach usually does not work. As a minority shareholder you often don't have a position of power. Or you end up realizing only a superficial success, meaning that a company will merely make public commitments while in reality nothing changes. I rather opt for a different approach. I engage in conversation with companies and their owners, try to understand their point of view and share our vision on the major problems in the world and the role they should play in that respect. It is a subtle game to play and you have to avoid the impression that you know everything better than they do. At the same time, you try to convince them using strong arguments that things have to change.”

 

Which arguments do you put forward? 

 "We show that saying goodbye to plans for new coal-fired power plants and switching from fossil-generated power to renewable energy is better from a reputational as well as from a financial perspective. Coal-fired power is CO2 intensive. If you build a new coal-fired power station now, you are committed to this source of energy for the next thirty or forty years. Whereas the costs of renewable energy sources, like solar and wind, continue to decrease and battery technology, for example, is becoming more and more competitive. In five or ten years, the energy market will look very different. So companies have to ask themselves: Who will purchase unsustainable electricity, if its price goes up in the near future? Who will finance the production of unsustainable energy? And who will buy a coal-fired plant if the company decides to sell it later on?”  

 

For which Asian companies has that approach been successful? 

“We have had many conversations with the management of AC Energy, the energy branch of Ayala Corp., one of the oldest and largest family conglomerates of the Philippines. We have shared our thinking with them that the expansion of coal-fired capacity will eventually lead to higher costs of finance, is not in line with the company’s sustainable reputation and would constrain our ability to invest in AC Energy. Last year, the company announced it will cease its operations in coal-fired power stations no later than 2030. Another example is the Indian company Reliance, also a family business. A global actor to which, in our opinion, a progressive climate policy should apply. APG discussed the matter also on behalf of Climate 100+, a partnership of large international investors. We were pleasantly surprised by the ambitious objective Reliance subsequently announced. However, we urge the company to supply more details: how is the company planning to achieve its objective, what are the intermediate goals and how will the company measure its CO2 emissions? A third example is the dialogue we entered into with the Malaysian energy company Tenaga Nasional Bhd (TNB), which is partly owned by the state. TNB announced at the end of last year to no longer invest in new coal-fired power stations. Furthermore, TNB will limit its coal-plant-based generation revenue to less than 25% in 2025 and increase its renewables portfolio, from 3.4 to 8.3 gigawatt by 2025.”

 

Are you pleased with these successes?

“Of course, that is both personally and professionally satisfactory. But it is hard to say whether this is the one-on-one result of our engagement. We are obviously also cooperating with other investors and companies make their own considered decisions. So we have to be modest. It does show, however, that our voice as a shareholder is heard and that engagement can lead to tangible results. The change in direction at Ayala, Reliance and TNB also has an important signal function for other companies in the region that, hopefully, will now also move faster into action.”

 

What do you do when companies don't listen and don’t change?

“If necessary, we increase the pressure. In general, we try to exert our influence as a shareholder. This may mean writing letters to management and other shareholders, entering into a dialogue with the company’s management, and of course using our shareholder vote. In specific circumstances, we may also talk to family members or the government. Furthermore, we may cooperate with other major investors and environmental organizations to take a stand or even seek media attention. For instance,  colleagues at APG did everything in their power to prevent the Korean energy company KEPCO from building new coal-fired power stations in Indonesia and Vietnam. When the company nevertheless continued the expansion, we sold our shares. We preferably only take that step when all our efforts appear to lead nowhere. We rather stay on board as a shareholder to exert as much influence as possible.”

 

What are the dilemmas you face on the path towards greater sustainability?

“That path is very much an uphill struggle. On the one hand we look at change in the long term for a more sustainable future from the investor perspective, and on the other hand we ask companies to take action now. During the current pandemic, the management often also has other priorities: keeping the company intact and ensuring that its employees are taken care of. Also, it is impossible to set the same sustainability criteria for all countries. In poor countries, with a lower average energy consumption and less environmental legislation, we must choose a different approach. A solution is needed to help poor countries finance the adaptation of their infrastructure to climate change. That brings us to the greatest dilemma I am struggling with: choices for a more sustainable direction have a large impact on people who have not yet had the chance to benefit from industrialization and economic prosperity. We have to strike a balance in that respect. Let’s hope that a combination of cleaner technologies, a growing willingness to finance them and a shift among businesses from fossil to renewable energy will lead the way to a more sustainable future, in which wealth and well-being are spread more evenly. In Asia and the world at large.”

Volgende publicatie:
Chief economist Thijs Knaap at BNR on Shell, dividends and China politics Biden

Chief economist Thijs Knaap at BNR on Shell, dividends and China politics Biden

Published on: 25 February 2021

“There is not one template for all energy companies to follow. A dogmatic approach to 'more renewable energy at any price' is not the solution.” says APG's Thijs Knaap in the Business program on BNR Nieuwsradio in response to news that Shell failed to meet its climate targets last year. “We will continue to discuss the energy transition and climate policy with Shell, and how Shell is making concrete arrangements for achieving climate neutrality. And we will continue to follow Shell closely and critically on the path to energy transition.”

 

Knaap, chief economist at APG, regularly joins the Zakendoen investor panel. In today's broadcast, he also discusses China's desire for President Biden to cut trade tariffs. “In policy there is sometimes a gap between idea and implementation. Trump's idea of ​​seeing China as an adversary was sensible in some way, but the implementation was chaotic and yielded little. Biden has largely the same idea, but a different implementation.”, He says in conversation with presenter Thomas van Zijl and panel member Martine Hafkamp.

Lower dividends are also discussed. Knaap: “No problem. It is no surprise that it was a bad year and that little profit was made. Much more important: survive the year and then just continue paying dividends. ”

 

Listen to the entire broadcast (Dutch) here. 

Volgende publicatie:
“There are certainly possibilities in the Netherlands, albeit on a smaller scale”

“There are certainly possibilities in the Netherlands, albeit on a smaller scale”

Published on: 12 February 2021

Jeroen Schreur on investing in the Dutch energy transition

 

From smart batteries to innovative charging technologies for electric vehicles: These are some of the initiatives through which fledgling companies are contributing to the Dutch energy transition. APG invests in these start-ups on behalf of ABP through Rockstart, an initiative that specializes in selecting and supporting promising young companies. The first companies selected to participate in this program were announced today. “We expect that Rockstart will help several of these companies to grow into leading players in the field of energy,” says Jeroen Schreur, in charge of investments in the energy transition at APG.

To facilitate ABP’s investments in the Dutch energy transition through relatively small and innovative projects and companies, APG established ANET (“the ABP Dutch Energy Transition Fund”) at the beginning of 2019. The fund invests in projects and companies that focus on the generation, storage, distribution, and conservation of energy. Schreur explains: “Pension funds often rely on larger companies and projects worldwide to invest their considerable assets. Although it is difficult to find them in the Netherlands, there are certainly opportunities here – albeit on a smaller scale. Ignoring this would be a great pity, because it is an interesting, dynamic market that offers attractive opportunities. By investing in a broadly diversified portfolio of promising young companies, we expect to achieve good returns at an acceptable risk.”

Follow-on capital
Apart from Asper (smart heating grids), Rockstart is one of the specialized investors with whom ANET is seeking to collaborate. Rockstart is what is referred to as a “start-up accelerator”: an initiative that offers promising young companies support and extensive guidance. Schreur explains: “Rockstart provides them with support to further develop their business, marketing, and funding plans. The initiative has been conducting programs like this in various branches of industry, such as the healthcare, agri-food, and ICT sectors ever since 2012. Through Rockstart, participating start-ups will be given access to relevant networks that will put them in contact with people, organizations, knowledge, expertise, and experience. In addition to the accelerator program, once the participating start-ups have produced successful results, they will also be given access to the necessary follow-up capital to secure their further growth. After all, finding funding for further growth is a difficult task, particularly for start-ups. Rockstart has developed a specific approach for the agri-food sector, which has already helped many companies reach the next phase in their development. It is doing this for ANET as well, where it will be applied to companies that promote the energy transition in the Netherlands through innovative technology.”

Attractive partnership
APG is an attractive partner for investors such as Rockstart and for businesses with clear growth ambitions. Schreur says: “Strategic partners such as Rockstart contribute knowledge, expertise, and experience. On top of that, APG offers the benefits of a long-term investment horizon, as we have more time to enable an investment to reach full maturity than venture capital associations, who tend to pull out after five years or so. This proposition is particularly attractive to companies looking for funding to secure further growth.”

The first start-ups selected for ANET are Advanced Infrastructure, Bia, Helio, Klimate, OKTO, Soolutions, Starke Energy, and eDRV. They all contribute, in one way or another, to solutions that make the Dutch energy system more sustainable. Starke Energy, for example, is preparing to install a smart battery in the office building of the Parteon housing corporation in Wormerveer. The technology linked to this battery allows the corporation to make use of the generated power when needed or, if there is a surplus, for it to be fed into the power grid in return for cash. Through this trial, Starke aims to explore the possibility of applying this technology to affordably enhance the sustainability of rental homes, in which the Dutch housing corporations – who manage over 2.4 million rental properties – could serve as a key enabler. This would result in a wonderful opportunity to grow for Starke Energy and is one of the reasons why this originally Spanish company decided to relocate to the Netherlands.

Power grid overload
Bia Power is also among the selected start-ups. The software developed by this company offers a solution for the strongly growing demand for power in response to the increasing number of electric vehicles (EVs). This can cause the power grid to overload at peak moments. Bia Power’s software identifies peaks and troughs on the power grid in terms of supply and demand. This facilitates optimum recharging, enabling the power grid to retain a perfect balance and batteries to last longer. Bia Power also has Spanish roots and is currently in the process of establishing itself in the Netherlands.

ANET currently has 250 million euros at its disposal for investment in start-ups and is managed by a team of four investors from APG. In addition to fund investments such as Rockstart, the team focuses on direct investments in companies and projects in their scale-up phase (companies with a proven technology that are ready to scale up for commercial applications). Companies that have already made a bit more headway in this respect are also eligible for funding via ANET.

Future leading players
Through Rockstart, ANET is building up a portfolio of fifty start-ups, who will be selected during the following five-year period. Eight to ten start-ups are added to this each year, on average. A second round will be held at the end of 2021. Schreur says: “Our selection process is very strict and takes several days of intensive screening to complete. Out of the fifty companies that were selected, perhaps ten to twenty will qualify for follow-up funding to help them grow further. Thanks to its accelerator model, Rockstart is more than capable of mitigating the risks commonly faced by young companies like these. A number of them will not be able to survive, but we expect that Rockstart will help some of them develop into future leading players in the field of energy.”

Volgende publicatie:
APG sells Korean energy giant due to coal expansion

APG sells Korean energy giant due to coal expansion

Published on: 29 January 2021

APG has sold the South Korean utility KEPCO. Despite our strong objections, the company continued to plan for new coal-fired power plants. In 2020, APG sold its stake in eight companies because they had plans for new or larger coal-fired power plants.

APG decided to sell its stake in Korean Electricity Power Company (KEPCO) after the company gave the green light to the construction of new coal-fired power plants in Indonesia and Vietnam. In line with the sustainable ambitions and goals of its pension fund clients, APG strongly opposed this plan. Companies need to stop planning new coal-fired power stations and to develop a strategy to greatly reduce greenhouse gas (GHG) emissions. 

Sustainability specialist Yoo-Kyung (YK) Park of APG Asset Management says it is 'disappointing' that KEPCO has not canceled its expansion plans. ‘The decision on the new coal-fired power plants was a litmus test for the company’s commitment to the Paris Agreement and join global efforts to combat climate change. The construction of these coal-fired power plants deepens the climate crisis and worsens the company's profitability in the long run'.

Pulling out all the stops

On behalf of its pension fund clients, APG usually first engages with companies that have plans for new coal-fired power stations. That’s also what happened at KEPCO. YK: ‘We pulled out all the stops to change the company’s mind. We wrote letters to management, increased the pressure in the media and worked together with civic organizations. Because 51% of KEPCO is owned by the Korean government, we also liaised with other investors to approach the government on its responsibility. Unfortunately, that didn’t work out’.

Coal accounts for 38% (Netherlands 9%) of electricity generated worldwide. Burning coal leads to relatively high GHG-emissions, in particular CO2. The vast majority of coal-fired power stations are located in Asia. The growing economies in the region are making extensive use of coal-fired power plants to meet their increasing need for electricity. In the US and Europe, the importance of coal-fired electricity is declining sharply.

We pulled out all the stops to change the company’s mind.

Exit due to coal expansion

Including KEPCO, APG sold eight companies with more than 90 gigawatts of coal-fired capacity in 2020 because they had plans to expand coal-fired power stations. The total annual CO2-emissions of these companies - all located in Asia - is 624 million tons.

Earlier, investors including APG succeeded in persuading a number of large financial institutions in South Korea to stop financing new coal-fired power plants and to sharpen their climate ambitions. That’s an important step, YK says. ‘South Korea is a signatory to the Paris Climate Agreement. But despite many promises, the country is still one of world’s largest carbon emitters . Through pressure on the financiers of coal-fired power plants, we are trying to change that’.

Climate neutral in 2050

APG’s largest client, civil service pension fund ABP, aims for a climate neutral portfolio by 2050, in line with the Paris climate agreement. This means that CO2 emissions related to the investments are to be reduced to net zero. ABP’s responsible investment policy includes targets that work towards this ambition (including phase out of coal mines and tar sands by 2025, no direct investments in coal for the production of electricity without carbon capture in OECD countries by 2030, and investing € 15 billion in the Sustainable Development Goal ‘Affordable & clean energy’). APG’s other asset management clients - bpfBOUW, SPW and PPF APG – also have climate targets, including a 40% reduction of their portfolios’ carbon footprint by 2025 (compared to 2015).

Volgende publicatie:
Everyone thinking about sustainable digitization

Everyone thinking about sustainable digitization

Published on: 29 January 2021

Digitization can contribute to a sustainable world. Examples include working online, with less commuting and decreasing CO2 emissions as a result. But the use of robots, artificial intelligence and online services also has its drawbacks, such as job losses or energy-guzzling data centers. Sustainable digitization is possible, but only if government, businesses and (pension) investors work together.


This was the conclusion of an online event organized by ABP and APG, entitled 'Making investments in SDGs work: sustainable digitization'. Digital technology is claiming an increasingly important place in the investments that APG makes for its pension fund clients. Not least because digital solutions can help with the major challenges faced by people and the environment, such as climate change or the COVID-19 pandemic.


For example, on behalf of its pension fund clients, APG invests in Moderna, a producer of a vaccine against COVID-19. "This biotechnology company had a vaccine design ready within a few days using digital design methods," says Ronald Wuijster, board member of APG and CEO of APG Asset Management. "Another example of an investment in digital solutions is Remote, in which we invest through private equity firm Inkef. This platform makes it possible for employees all over the world to work together and it handles the associated administrative matters for the company."


Downsides

But there is another side of the coin. Robotization is accompanied by job losses and the need for retraining. Data centers gulp energy - they are expected to account for 80% of the global energy demand within 20 years. The raw materials for computers, chips and other hardware are often extracted under difficult circumstances. Half of all cobalt, an indispensable raw material for batteries and accumulators for electric cars, comes from the Democratic Republic of the Congo. There are many instances of human rights violations and child labor in that country. Closer to home, the position of power of major platforms such as Facebook, Twitter and Google raises questions about data privacy.


In 1986, the Dutch government set up an institute to investigate the impact of technology on our lives: the Rathenau Institute. Among other things, this institute conducts research into how you can match the supply of and demand for energy with the help of digital technology. Melanie Peters, director of the Rathenau Institute: "Energy from sources such as wind, water and combined heat and power is generated locally. We want to find out how to match this supply as closely as possible to the demand of people and businesses, with as little waste as possible."

Circular entrepreneurship must pay off and digitization can play a role in this

Control over your own energy

Major platform companies in the United States and China are already measuring people's energy needs through their thermostats. This way, they can predict when energy demand will peak and respond to this. "Convenient," says Peters, "but you don't want large businesses or other countries to determine when the energy supply in the Netherlands is switched on or off. This means you shouldn't only invest in the large technology companies, but also in smaller, innovative companies in the Netherlands or Europe. And talk to them about control."
Maurice van Tilburg is familiar with these kinds of start-ups. He is a director at Techleap.nl, an interest group for Dutch start-ups. "One of those start-ups, for example, has designed a smart tool that can save a lot of energy," says Van Tilburg. "With the help of their software, which uses artificial intelligence, among other things, you can plan better and therefore energy consumption in logistics can be drastically reduced."


All hands on deck

Digitizing in a way that contributes to sustainability is a complex issue for which there is no single solution. "Collaboration is crucial," says Van Tilburg. "For example, it is still often cheapest for businesses to throw away goods that they no longer use. Circular entrepreneurship must pay off and digitization can play a role in this. For example, the government can factor in the costs of waste processing. But there is also an important role for pension investors such as APG and its pension fund clients. Investors who are able to hold out for a long time, who think along with a business. International cooperation is essential in this respect, so that we do not all invent the wheel individually."


"ABP is already taking steps with investments in start-ups via the ABP Netherlands Energy Transition Fund (ANET) and Inkef," says ABP CEO Corien Wortmann. "But we want to do more. I call on the government to create more opportunities for public-private partnerships, so that government and (pension) investors can pool their money and expertise to make sustainable digitization possible."

Volgende publicatie:
The Biden administration can boost sustainable investment

The Biden administration can boost sustainable investment

Published on: 20 January 2021

What significance does Joe Biden's appointment as president of the United States have in terms of sustainable investment? Biden's plans for new rules for climate, workers' rights and more openness put Anna Pot, APG's head of Responsible Investments Americas, in a hopeful mood. However: 'America is so divided, it's still far from certain.'

 

Normally on the first day of the week, the APG investment teams in the United States are busy trading on the New York Stock Exchange. But not at the time of the interview: The third Monday in January of each year, Wall Street is closed on account of Martin Luther King Junior Day. On her day off, Anna Pot, APG’s Head of Responsible Investments Americas, takes her time to share her views on the changeover of power at the White House: what significance will Joe Biden and Kamala Harris' policies as new US President and Vice President respectively have in terms of responsible investment?

 

Bizarre times

Ms Pot and her family moved to New York in the summer of 2016 to set up a local responsible investment team. The team is working with 165 APG investors in the US to invest the pension capital of the affiliated funds, sustainably. She looks back on four special years, coinciding exactly with Donald Trump's first (and only) term as president. The year 2020 was particularly 'bizarre', giving us the presidential elections, the Black Lives Matter demonstrations and the Corona crisis. Since March, all APG employees have been working from home in the US as well.

 

Organizing a presidential dinner at home

She makes the most of it, although she misses the hustle and bustle of Manhattan and especially the direct contact with her colleagues and the investment teams. Yet the crisis makes her resourceful: for example, a meeting was held in Central Park once in the open air and she participated with 159 APG colleagues in the corona marathon: running the New York marathon together, virtually. And by way of distraction for her family, she organized a presidential dinner at home, among other things. The long election battle between Trump and Joe Biden and the contention of the result culminated in Trump supporters storming the Capitol in Washington DC on January 6.

 

How have you experienced the past two weeks?

'It was unprecedented. My colleagues and I were glued to the TV screen, we couldn't believe our eyes. We called each other and sent text messages: Did you see this?'

What does the corona crisis mean in terms of sustainable investment?

'Over the past two years, the total of 'sustainable' investments in the US increased by 42% to $ 17.1 trillion. One in every three dollars invested is now subjected to the three ESG factors (Environment, Social & Governance) (source: US, SIF, the American lobby for sustainable development, ed.). When I came here four years ago, companies still often claimed that sustainability and economy were two separate things. And because the Trump administration paid little attention to sustainability, companies began to realize it was up to them. Younger generations expect that too. Some American companies and investors took the initiative themselves and now publicly give their views about social issues such as immigration, climate and discrimination. I must add that in the US, sustainability comes in all shapes and sizes and sometimes, it is tantamount to greenwashing. That's when companies are all talking sustainability, without them actually putting it into practice.'

 

What effect do you expect the Biden administration to have on sustainable investment? 

'Biden wants to immediately reverse 100 measures taken by Trump, who in turn reversed policies of his predecessor Barack Obama. It's like a rollback of the rollbacks in the fields of climate, social policy and financial regulation. Trump, for example, took the US out of the Paris climate agreement, but Biden will restore that on his first day as president, right after the inauguration. It's claimed that all sorts of new rules will be introduced to encourage companies to behave more sustainably and socially and to make them more open about this at the same time. The Biden administration predominantly uses a different tone, with respect for, for example, the environment and workers' rights. That in itself carries a promise and hope for the future of sustainable investment.'

 

We can hear a but coming...

'Yes, but America is a deeply divided country. No less than 46% of Americans voted for Trump and in the Senate, the Democrats only hold a narrow majority. It therefore very much remains to be seen whether Biden can realize his plans in this polarized society and political instability. I'm currently reading Obama's memoirs and it shows once again that, as a president, you can only achieve things if you know how to explain them well and manage to accumulate broad support. This is still far from certain.'

 

Let's see the glass as half full and suppose Biden manages to push his plans through, what does that mean for APG as a responsible investor?

'If the new government encourages companies to behave responsibly, it creates new opportunities for us to invest in those companies. This way, we can even be more effective in contributing to the financing of the climate transition and the innovation that is required for this. Think of new forms of clean energy and electric cars. It is also becoming easier to talk to companies about making changes in the social field. For example, employee rights such as paid sick leave. During the Corona crisis, Americans suffering symptoms often cannot afford to stay at home because they're not being paid when they're off sick. It has been promised that discrimination in companies will also be tackled. With the social policy of the new administration, we are in a better position to hold companies accountable for the way they treat their employees.'

How does APG approach this in specific terms?

'The new administration wants to come up with rules that force companies to provide more information about how sustainable and social they are. This should provide a quicker insight as to who the front runners are and who lags behind in the field of corporate responsibility. With that information, we can make the right investment decisions and maintain a better dialog with companies. We also hope that US pension funds will start investing more responsibly as a result of the new rules. Together with those 'allies', we can exert more influence and we'll have more possibilities to realize what we consider is important.'

 

Does the Biden administration also come with any disadvantages for the investments?     

'Under the new administration, US companies may be confronted with regulations and possibly higher labor costs. However, we believe that, in the long term, companies that operate more sustainably will perform better and be better prepared for the future. As a long-term investor, we therefore mainly see advantages. It would be good if Biden and Harris could unite the divided parties in the country once again. Hopefully, the new administration can help ensure that investing and sustainable investing become synonymous with each other over the next four years.'  

 

Want to read more about the significance of the new US presidency for responsible investment? Click here.   

Volgende publicatie:
“We are an involved shareholder; not an activist”

“We are an involved shareholder; not an activist”

Published on: 15 January 2021

Sustainable, responsible investing is gaining popularity, including at APG. For Claudia Kruse, who is in charge of APG's sustainable investment policy, this can’t move fast enough. But experience has taught her that patience and dialogue are the best ways to achieve sustainability. Even now, during these Covid times.

 

She’s not one to brag, but it’s certainly something to secretly be proud of. German Manager Magazin placed her prominently among the world’s 100 most influential female top economists in the last issue of 2020. Women in decisive positions who, the authors say, strive for “einen anderen Kapitalismus”. This is not surprising. Coworkers praise her smarts, her boundless energy and genuine heart for sustainability. That heart was already in the right place during her student days in the early 1990s. “As students at the time, we were very concerned about the climate report Our Common Future, drawn up under the leadership of the Norwegian Prime Minister Brundtland. She called on the world to become more sustainable; that got me thinking. And that just really never stopped.”

 

In her role as Managing Director Global Responsible Investment & Governance, as her full job title states, she can now look back on some notable achievements. The UN organization Principles for Responsible Investment calls APG one of the leaders in responsible investment. The Dutch Association of Investors for Sustainable Development (VBDO) named ABP (the largest fund that APG works for) as the most sustainable Dutch pension fund for the third year in a row and bpfBOUW as the second one. Kruse also plays an important role in the establishment of the SDI Asset Owner Platform, an initiative of APG and PGGM that helps investors assess companies on their contribution to the Sustainable Development Goals. Simple question, difficult answer: how does Claudia Kruse get it all done? Where are the challenges? And what needs to be improved?

 

To start with the now: what about companies’ sustainability ambitions now that they have to pull out all the stops due to the Covid crisis? Will that diminish?

“No, it doesn’t look that way. The Covid crisis seems to be raising awareness around climate, people’s wellbeing and the importance of good health. At the same time, it is true that some companies and countries are now struggling. This could contribute to them losing sight of the United Nations’ Sustainable Development Goals. These Sustainable Development Goals include good education for all, clean water, climate action and accessible healthcare.”

 

APG invests some 560 billion on behalf of the funds. In this world, aren’t returns ultimately more important than achieving sustainability goals? 

“Returns are important to us too, of course. We want our funds’ participants to continue to be assured of a good pension. But in addition to returns, the factors of risk, cost and responsible investment are important as well. We always consider these four factors in conjunction with each other. But every investment must be responsible in its own right. Both we and the pension funds we invest for are convinced that responsible investment does not have to come at the expense of the returns. In other words, we expect to achieve at least the same returns from responsible investment as we would from non-responsible investment. So why not do it? On average, investing responsibly has earned us a return of 7% per year in recent years.”

 

What are you not yet satisfied with?

“I think we can give the outside world even more insight into what we are doing to increase sustainability, what we are achieving - and what we are not (yet) achieving. And why we are seen as leading the way.”

 

APG took the initiative to create the SDI Asset Owner Platform. Why?

“We launched this platform last summer, together with PGGM, AustralianSuper and British Colombia Investment Management Corporation. Together we have more than 1 trillion (a thousand billion - ed.) dollars in assets under management. With the help of artificial intelligence, investors can find out whether and how many companies are contributing to the Sustainable Development Goals with their products and services. Investors are very keen to understand this, but it has often been difficult due to a lack of reliable data. Our platform provides them with a common definition, taxonomy and data source for their investments. We are ultimately doing this for our clients’ participants to whom we want to offer an affordable pension in a sustainable world.”

 

There is much to be done about investing in fossil fuels. There is also dissatisfaction at companies themselves. Shell, for example, saw managers leave because they felt the company was too slow to switch to renewable energy. Yet APG remains on board. Why?

“Experts agree that for the time being, renewable energy can only meet the growing demand for energy to a limited extent. Oil and gas will still be needed. I think we can invest responsibly in producers of fossil fuels, but they must make the switch to sustainable energy. And drastically reduce their CO2 emissions. That is why we invest a lot of time and energy – in some cases in collaboration with other investors - in persuading companies to commit to ambitious climate targets. Make no mistake, we have been in very intensive discussions with Shell and other large oil companies for years. We definitely don’t always agree with each other, but we do have an open dialogue.”

 

But is that dialogue having a concrete effect?

“Shell announced in April of last year that its product chains must be climate neutral by 2050. This means that, on balance, the energy group will no longer emit any greenhouse gases. This includes not only direct emissions from Shell itself, but also emissions from suppliers and customers. With these plans, Shell is building on the agreements that the company made in 2018 with the partnership Climate Action 100+, a collaboration of large investors, including APG. BP and Total are moving in the same direction, which I think is very positive.”

 

Critics argue that oil corporations like Shell could close a few refineries right now; then you’d have fewer emissions immediately. 

“It’s more complicated than that! We are primarily a responsible, long-term investor, and we want Shell and similar companies to make a very deliberate transition.”

For me, the glass is always half full

And other sectors? Take banks, for example: you could withdraw from banks that finance unsustainable projects, such as oil pipelines, etc.

“We recently had another great result in the financial sector. In September, KB Financial Group, South Korea’s largest financial services company, announced it would stop financing new coal-fired power plants. Local competitors have since followed suit. This is important, because South Korea is a country that emits a relatively large amount of CO2. The fact that we urged this company to adopt a clear and consistent approach to sustainability certainly contributed to this. ABP, our largest pension client, will stop investing in companies that derive a large part of their turnover from coal mines and tar sands, from whose deposits producers extract oil, by 2025 at the latest. Another example is Nestlé. It wants to be climate-neutral by 2050. This is also important, because the food sector and associated land use account for a quarter of global CO2 emissions. Within Climate Action 100+, we took the initiative to have conversations with Nestlé.”

 

In addition to environmental considerations, you also weigh social criteria. What has APG achieved in this regard?

“Take the example of child labor in cocoa farming. This is a major problem. A number of large buyers of cocoa - such as Barry Callebaut, Lindt & Sprüngli, Mondelez and Nestlé - have set up audits to detect child labor at suppliers or have committed to buying only certified cocoa. We often work closely with like-minded investors worldwide. Then we have more clout and can optimize the effects of responsible investing for our clients.”

 

If companies don't become more sustainable quickly enough, will APG sell the shares? Or will you enter into a dialogue with them?

“We would do the latter. When you sell investments like that, you may be sending a signal once, but after that you have lost your influence. Without having changed anything in the real world. So, we engage in dialogue. For example, we ask how the company plans to adapt to climate change. Those conversations usually take place in an atmosphere of openness, where we don’t always have to agree or become involved.”

 

Do you give them any suggestions?

“No, we leave it up to them. They have to figure out how to shape sustainability; we never sit on their chair. We are an involved, active shareholder; not an activist.”

 

Investing responsibly also means that APG pays attention to the remuneration of top executives.

“Well, we are not primarily concerned with the level of remuneration, but with the criteria on the basis of which those top executives are paid. We want companies to communicate clearly, for example in their annual report, how they deal with executive pay. What must the directors and the company achieve before they are paid a bonus, variable or otherwise? We are also working on this subject with other asset managers and pension funds.” 

 

What did this cooperation yield in concrete terms?

“Among other things, we voted down a remuneration proposal from a Dutch company four times last year. Although we would prefer to reach a solution in consultation with the company, of course. We use our advisory vote worldwide when it comes to the remuneration of top managers. We are least likely to vote in favor of executive pay at U.S. companies, partly because they often pay out excessively high severance packages there.”  

 

Is it all going fast enough for you? 

“No, it definitely isn’t. It could be done faster, but that’s easier said than done. As a pension investor we have a long-term horizon. As for the pace of sustainability, you have to realize that major changes like this often happen step by step. Fortunately, more and more countries and companies are feeling the urgency to become more sustainable. So, I’m optimistic. That’s also in my nature; for me, the glass is always half full.”  

Volgende publicatie:
APG increases equity interest in electric train traffic Europe

APG increases equity interest in electric train traffic Europe

Published on: 13 January 2021

APG has agreed the acquisition of a 20.9% stake in Alpha Trains from AMP Capital on behalf of its pension fund clients. APG already owns a 41.1% indirect interest in the business that was acquired in 2019.

 

The investment in Alpha Trains, a leasing company for passenger trains and locomotives in Continental Europe, is in line with APG’s sustainable investment strategy. The majority of the fleet is electric and therefore contributes to lower CO2 emissions from the European transport sector.

 

Strong position

Arjan Reinders, Head of Infrastructure at APG: "Alpha Trains is an excellent company with a strong position in the Continental European rail market. We have agreed this acquisition at a time of continued growth of the rail passenger and freight markets in Europe, and we believe that the ongoing liberalisation of the European market will drive further investment in the rail sectors. We have the ambition to contribute further to the success and growth of Alpha Trains in the long-term."

 

Leading

Alpha Trains is one of the leading rolling stock companies in Europe, providing flexible leasing solutions to train and locomotive operators across 17 European countries. Its portfolio consists of approximately 800 trains and locomotives. The majority of its fleet is electric, positioning Alpha Trains as a leader of the clean energy transition in European rail.

 

You can read more about our stake in Alpha Trains in our previously published article.

Volgende publicatie:
APG calls on Amazon to show results of Covid approach on worker safety

APG calls on Amazon to show results of Covid approach on worker safety

Published on: 17 December 2020

APG co-leads a shareholder proposal calling on Amazon to release details on efforts to protect workers during the Covid-19 pandemic. The proposal follows an independent report that found Amazon is understating the impact of its practices on health and safety, and some of its warehouses were Covid hotspots.

 

APG co-files the proposal on behalf of its pension fund clients, together with the New York City pension funds. The proposal follows the Committee’s failure to respond to a similar request from the major shareholders in May and will be subject to a shareholder vote at Amazon’s 2021 annual meeting if the Committee again fails to respond.

 

Amazon previously announced it was investing billions in the safety and health of its workforce.

The investors ask Amazon to demonstrate with hard data that investments in worker health and safety measures are genuinely keeping workers healthy and safe. “APG wants to understand how effective these initiatives have been”, says Anna Pot, Head of Responsible Investments Americas at APG Asset Management. “Is it working? Are employees actually safe?”

 

American tech company Amazon is a global leader in e-commerce. The issues addressed in the proposal have arisen amid a year in which consumers, due to the Covid-19 pandemic, have increasingly relied upon online orders for their day-to-day needs.

 

Read the press release.

Volgende publicatie:
“Everyone here has the same goal: a climate-neutral economy”

“Everyone here has the same goal: a climate-neutral economy”

Published on: 26 November 2020

Investing in fossil energy: for how long? That was one of the themes during the investor panel at BRN Zakendoen this week. According to Thijs Knaap, senior strategist at APG Asset Management, it is neither realistic nor sensible for a pension fund such as ABP (with APG as administrator) to leave fossil fuels in the short term. Because: "It is better to have a Dutch pension fund at the table than a shareholder who is less concerned with the environment."

 

Moreover, it is also unrealistic for economic reasons. 80 percent of the economy obtains energy directly or indirectly from those fossil fuels. We are in a transition to something that is not yet there. "Should you stop investing in airports, trucks?"

Knaap emphasized that ABP listens very carefully to the participants. “We share the concerns. ABP has a solid sustainable investment policy. And everyone has the same long-term goal: a climate-neutral economy.”

The comparison with the divestment of 4 billion euros in fossil fuels recently announced by the PFZW pension fund is flawed, says Knaap. “That is about futures trading. Not about stocks. That's a different strategy.”

 

Labeled bonds

In addition to investments in fossil fuels, there was also talk of an interesting new trend in investor circles: the so-called "labeled bonds". According to Knaap, 2020 is “a good year for bonds like this. Bonds usually don't have much movement; they are a kind of tradable debt. But there are bonds with a label, where the person who issues them determines in advance what they should be spent on. For green or social goals, for example. Those labels are becoming popular, with € 304 billion already spent this year. More than in 2019. ”

Knaap referred to the so-called SURE Bonds that are issued by the EU. They are used to protect jobs within the EU. APG recently invested 170 million euros in these SURE bonds. Knaap: “It is an interesting development, because the investor in debt, which is normally a remote investor, has more and more influence on policy. Because he or she can choose to put the correct labels on his bonds.” He cites the ECB as an example. “Previously, the ECB bought bonds and that was a neutral monetary operation. But you see that more and more labeled bonds are being bought there too. From the right parties with the right labels. In this way, investors have a little influence on what happens in the world.”

Volgende publicatie:
2020 will be a record year for green bonds

2020 will be a record year for green bonds

Published on: 19 November 2020

APG has been an advocate of the green, social and sustainable bond market for years

 

2020 is set to become a record-year for global green, social and sustainable (‘labeled’) bond issuance, with more deals and increasing variation in terms of size, labels and issuers. Spurred on by skyrocketing issuance of social bonds in response to the Covid pandemic, the market has reached a point of increasingly rapid growth.

 

The market has been growing year after year since the world’s first green bond was issued in 2009. But there are definite signs that the market is shifting gear; in the first nine months of 2020, total labeled bond issuance stood at € 304 billion, compared with € 274 billion issued throughout the whole of 2019. In part, market growth is driven by the same factors as before, such as stricter environmental legislation and a shift in investor preference towards a more sustainable asset allocation.

 

Inflection point

But there are also other factors at work. The social bond market has seen a flurry of activity this year in response to the Covid pandemic. Governments, supranational agencies and even companies have issued ‘Covid bonds’ to fund, among other things, employment protection programs and support for small businesses. The European Union (EU) recently issued the first tranche of up to € 100 billion in EU social bonds to protect employment. Together with the EU’s plan to finance a third of its € 750 billion recovery package through labeled bonds, this will give a further boost to the market.

 

“Following the Covid outbreak, the labeled bond market has reached an inflection point of accelerated growth,” says Joshua Linder, credit analyst Fixed Income at APG Asset Management (APG). Strong growth is reported for all labeled bond types. But social bonds, in particular, experienced a startling jump, with issuance in the third quarter of 2020 over 11 times higher than the previous year.

 

Diversity in size, labels and issuers

The scale of individual labeled bond deals also makes 2020 stand out. During the first nine months of this year, there have been 30 deals of over € 1.7 billion ($ 2 billion), compared with 15 across the whole of 2019. One of these large deals was the € 4.85 billion sustainable bond issue by Google owner Alphabet - the largest labeled bond ever issued by a company. Linder: “This bond is a good example of the project mix enabled by a sustainable bond, combining impactful projects linked to affordable housing and support of small businesses with environmental initiatives.”

 

The € 1.7 billion-plus bond issues are distributed broadly across issuers (governments, supranational agencies and corporates) and labels (green, social and sustainable). “This is another indication that the market is maturing rapidly”, says Adam Hynes, portfolio manager Fixed Income at APG. “Market growth not only allows us to increase our exposure, but also to diversify across sectors and issuers that were not previously participating in this market.” 

 

Growth has been particularly strong in the financial sector. One example is the social bond issued by Spanish bank BBVA in May 2020, the first Covid bond issued by a European financial institution. “During the peak of the crisis, several Spanish banks responded by issuing social bonds to combat the healthcare emergency and the pandemic’s socioeconomic impact”, says Rinse Boersma, portfolio manager Credits at APG. “Significantly, the issuance was five times oversubscribed, but due to our longstanding relationship with issuers we could still get a good allocation.”

 

Also, there were several sustainability-linked bond deals during the third quarter of 2020, an encouraging sign of momentum in this nascent market. Contrary to labeled bonds, the proceeds of sustainability-linked bonds are not ringfenced for particular ESG objectives but can be used for general corporate purposes. The issuer, however, promises to achieve specific environmental or social goals and has to pay a premium if these commitments are not met.  

 

Driving the market

From the beginning, APG has encouraged the growth of the labeled bond market on behalf of its pension fund clients. “It is not overstating things to say that our engagement with companies and stakeholders has been a driver for the development of this market”, says Scott Cavanagh, credit analyst Fixed Income at APG. “APG is well known for being a tried and true advocate of growth in labeled bond issuance as well as for its leadership through a range of initiatives.”  

“As one of our peers stated: ‘You always know who will be asking about green, social or sustainable bond issue’,” Cavanagh continues. “We share what we find important and the lessons learned from prior deals with companies and other stakeholders. And of course we express our interest in labeled bond issuance and overall support of the market. That is key to our approach.”   

 

Contribute to sustainability ambitions

Investing in labeled bonds is becoming more and more important to APG and its pension fund clients. At the end of 2019, we had invested € 9 billion in such bonds on behalf of ABP, bpfBOUW, SPW and PPF APG, making APG one of the world’s largest labeled bond investors. In 2020, we have thus far invested over € 1 billion in Covid bonds. To make (potential) issuers aware of our expectations and foster healthy development of the market, APG has published the Guidelines for Green, Social and Sustainable bonds.

 

With the market expanding and issuance becoming more varied in terms of deal size, issuers and labels, the labeled bond landscape is clearly evolving in the right direction. There remains, however, ample room for improvement. “It is important to always be aware of potential greenwashing,” Cavanagh says. “And while APG is a clear advocate of the market, we also acknowledge that not all deals fit with our risk and return criteria.”

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:
'Sustainability doesn't have to cost anything'

'Sustainability doesn't have to cost anything'

Published on: 6 November 2020

Run on first EU corona bond. This was the headline in the Financieel Dagblad on Wednesday, October 21. APG was one of the buyers of this “social bond”. Why did APG participate in this? What is so attractive about social or green bonds? Sandor Steverink, Head of Treasuries at APG, about return versus sustainability, the increasing importance of sustainable bonds and the rationale behind investing at a negative interest rate.

 

With its SURE program (the term stands for Support to mitigate Unemployment Risks in an Emergency) the EU wants to pick up a total of 100 billion Euros in loans, to issue to the member states. The goal of this is to support them in their efforts to keep companies and their employees working during the corona crisis. The first batch of these, valued at 17 billion Euros, was issued in October. The buyers of these “social” bonds, including APG, were lined up: the issuance was oversubscribed as many as fourteen times; a record.

 

APG ended up with 170 million Euro’s worth. Happy?

“Meh. We had registered for about 500 million Euros. Usually, you end up getting 50 to 80 percent of that. This time it was only 30 percent. Considering the enormous oversubscription, that percentage is not too bad: parties that do long-term investments, like us, were assigned relatively more bonds, because they are not going to put those bonds back onto the market right away.”

 

Why is APG investing in these bonds anyway?

 “Because they are socially responsible. In addition, we have also tested them – like we do all bonds – for these factors: return, risk and costs. The results told us that this was an interesting investment. And we were not the only ones who thought this, as shown by the massive interest. I had expected that there would be a lot of interest; these social bonds provide relatively better returns than state bonds from triple A-rated countries like the Netherlands and Germany. They are very tradable, and they are safe if we look at the credit risk: the EU won’t topple anytime soon. Plus, the EU has created a sort of loan-loss reserve for this SURE program that has 25 billion Euros in it; a guarantee that provides investors with extra security.”

 

How important are the green and social bonds to APG?

“They are becoming more and more important to us and to our clients. We have now invested some 9 billion Euros in green bonds, compared to less than two billion in 2016. And 1 billion Euros in social bonds. Our investments are based on the United Nations' Sustainable Development Goals. Investing in green and social bonds - both of which come under the heading of sustainable bonds - fits in well with that. And we use our own classification system to check whether the claim of social or green is correct.”

 

Does every major investor use its own sustainability test?

“No, most institutional investors are satisfied with the stamp that the issuing party puts on them, based on the general guidelines and principles. APG started developing its own sustainable investment department, as early as 2007. That department has an enormous amount of knowledge by now. Using our own guidelines, we can therefore accurately measure the extent to which an investment is really sustainable.”

 

Do APG's clients demand that you invest sustainably as much as possible? Or do they mainly look at returns?

“Both. We have on-going close consultations with the pension funds that we invest for. We want to be at the forefront of sustainable investment because, just like our clients, we can see the benefits of it. They want an increasing portion of their pension assets to be invested responsibly, to be invested with impact. In 2025, for example, ABP aims to have 20 percent of its assets invested in Sustainable Development Goals, including these SURE bonds. But that could just as well be sustainable equities, sustainable social housing or a wind farm.”

Sustainability doesn't have to cost anything

Back to the SURE bonds. The 170 million Euros consists in part of 20-year bonds with a yield of 0.13 percent and 10-year bonds with a yield of -0.24 percent. Why not choose only bonds with a positive return?

“I’ve been asked that question before. We don’t just look at returns. If, as a bond investor, we only opted for positive-yielding bonds, the risk of that portfolio would also increase. The trick is to combine high-risk investments, often with a slightly higher return, with a less risky investment. At the portfolio level, this creates a better risk/return ratio. We invest for the long term with a balanced consideration between risk and return.”

 

Diversification pays off?

“Absolutely. Don’t forget that we don't usually hold bonds for their entire term. We sometimes sell in the interim, for example if the bond price gives us cause to do so, or if we see better alternatives. Incidentally, of the 170 million Euros in SURE bonds, we have invested the vast majority - ninety percent - in 20-year bonds, which therefore yield positive returns.”

 

Will all EU countries now receive a share of the proceeds of these SURE bonds?

“No, not all of them. Minus the United Kingdom, we now have 27 member states. Fifteen of them had subscribed to this bond, mainly countries from Eastern and Southern Europe. The Netherlands didn’t, because we can borrow cheaper ourselves, because we score so high on creditworthiness. Just like Germany.”

 

If costs and risk are average for a potential investment, then as a portfolio manager you have to choose between sustainability and returns. What prevails for you in that case?

“In other words, do we have to pay a price for sustainability? Actually, it doesn’t have to be that way. And the two can also go together very well. But that choice can create an area of tension. Sometimes it’s easy to assess the options. Three years ago, for example, we bought French green bonds for some 700 million Euros. At that time, they had a higher yield than an ordinary French government bond, plus they were green. That was a no-brainer for us. But currently, a green bond increasingly produces a relatively lower return. In that case, we’d rather opt for an alternative with a higher yield. We’re not a charity, we want to invest the pension assets entrusted to us prudently.”

Ultimately, these social bonds also create more prosperity

Participants could argue that their pension contribution via this social EU bond is used to support the weak brothers in the EU …

“Well, that is actually true. But that’s the way the world is. Ultimately, these social bonds also create more prosperity. European countries with the lowest credit rating are not necessarily the weakest link in the chain, which determines the strength of the entire chain. By cooperating within the EU, you are more than the sum of the parts. And the strongest shoulders carry the heaviest burden. This is also reflected in the ratings. The EU as a whole has a higher rating than the average of the individual EU countries.”

 

As a portfolio manager, how do you know for sure whether APG’s money is actually being spent in a social or green way through sustainable bonds?

“As a country or a company, if you want to borrow money through a sustainable bond, you must indicate in advance which projects you want to use it for. Last year, for example, the Netherlands raised just under six billion Euros with its first green bond. The state will then be accountable to the investors. For example, we know that the proceeds were earmarked for the construction of the mega-sized bicycle parking facility in Utrecht, the reinforcement of the Afsluitdijk and a pilot to insulate rental housing in Hengelo. As an investor, you want maximum transparency. You want to know exactly what you’re investing in - lesson 1 for every investor. Fortunately, as a bond investor, we don’t have to check all the projects ourselves to see if the proceeds of the bond actually go to those projects and we can make use of that country or company’s accountability.”

 

And what if a green investment like that turns out to be gray after it’s checked?

“If you don’t keep those promises, you do have a problem and we no longer see those investments as sustainable. I think it would certainly damage your reputation. But as far as I know, there are no examples yet, but I certainly do not rule out the possibility for that to happen in the future.”

 

How does all that sustainable investing affect your own behavior?   

“Haha, the effects are pretty far-reaching, without us really noticing it. We recently had solar panels installed on our roof. And I’m having more and more trouble lighting the fireplace. I think most people are going through a transformation like that now. We’re also seeing this worldwide in the growth in sustainable investment. This is a positive development. We are all raising the sustainability bar higher and higher.”

Volgende publicatie:
Financial sector on track with implementation of Dutch Climate Agreement

Financial sector on track with implementation of Dutch Climate Agreement

Published on: 4 November 2020

More than half of the financial institutions that have signed the Commitment to the Dutch Climate Agreement already report on the CO2 impact of their financing and investments. Gaining insight into the carbon footprint is an important step towards reducing emissions in line with the Paris Agreement’s goal to limit global warming to well below 2 degrees Celsius.

 

The Dutch financial sector is thus on track to meet one of the commitment’s key obligations, according to the first report of the Financial Sector Climate Commitment Committee. In response to the report, the Dutch minister of Finance Wopke Hoekstra wrote he is pleased to see that Dutch financial institutions are worldwide leaders in this area.

 

The report was prepared by consultancy firm KPMG and accompanied by a carbon impact reporting framework as well as an overview of current measurement methods in the Dutch financial sector. APG contributed to these documents by providing expert advice.

 

Sharing experiences

“It is important to combine various parties’ experiences with measuring the climate impact of investments, says Joost Slabbekoorn, responsible investment specialist at APG. ‘In this way we learn from each other and work towards a methodology that is transparent and verifiable. This is essential to establish trust and, ultimately, to make a contribution to the Paris climate goals.”

 

Worldwide, 57 financials have now adopted the PCAF carbon accounting methodology, of which APG, together with other Dutch financial institutions, is a founding member. While Dutch financial institutions are leaders in this area, the report also shows there is still a long way to go towards comparable standards and targets. The main challenges are methodological differences between impact measurement methods, the limited availability of high-quality data and potential understatement of the importance of engagement with investees.

 

Expanded scope

APG and its clients have been reporting the carbon footprint of listed equity since 2015; all clients have CO2 reduction targets for their equity portfolios. ABP earlier this year announced its new reduction target of -40 percent in 2025 (compared with 2015). Starting with the 2020 reporting cycle, we will extend the scope of these disclosures to include corporate bonds, real estate and private equity (representing over half the assets under management). The objective is to allow clients to set 2030 Paris-aligned climate targets no later than 2022.

 

The financial sector’s commitment to the Dutch climate agreement goes beyond merely reducing the carbon footprint of the investment portfolio. Slabbekoorn: “As a large investor, we have a broad set of tools at our disposal to drive lower emissions in the real world. This includes engagement, also together with other investors, to encourage the companies we invest in to reduce carbon emissions and investing in climate solutions, such as renewable energy and carbon saving technology.”

Volgende publicatie:
ABP and APG call on government to increase investment opportunities in the Netherlands

ABP and APG call on government to increase investment opportunities in the Netherlands

Published on: 30 October 2020

According to pension administrators Corien Wortmann and Gerard van Olphen, the government is lacking a “clear plan”

Invest more in the Netherlands. That is what pension fund ABP and APG executives want. But that can only be done if the government makes it possible. Currently, there are too few opportunities to invest in large public works as an institutional investor. That has to change, board chairs Corien Wortmann (ABP) and Gerard van Olphen (APG) argue in a joint interview in de Telegraaf. Wortmann: "If we were to invest an additional 1% of ABP's capital in the Netherlands, we would be talking about 4.5 billion".

 

To accelerate economic recovery after the corona crisis, investments in the Netherlands are badly needed. That is why the government created the National Growth Fund. This fund contains €20 billion for projects in the areas of infrastructure, research and development and education.

In principle, it is a great initiative, but no one but the government “may” participate. So, there is no place for private investment. “A missed opportunity,” says Van Olphen in de Telegraaf: "The Growth Fund is fully focused on the €20 billion in public investments. But surely you should want the €20 billion to act as a flywheel, a catalyst for private investment".

No clear plan

According to Van Olphen and Wortmann, the Dutch government lacks a clear plan for deploying public money and private investments together. For example, for the development and maintenance of infrastructure and schools. But these so-called public-private partnerships are necessary for pension funds to be able to invest more in our country. According to Wortmann, this is what ABP participants want: "It is important to our participants that pension euros contribute to economic growth, employment and better housing in the Netherlands. These pension euros are now mostly invested in foreign projects. Van Olphen mentions a few examples in the interview: "Streetcars and metro lines in Barcelona and Madrid, toll roads in Italy and France, the Melbourne ring road, Brussels Airport, solar parks in California and China.

But it is also possible in the Netherlands. Wortmann: "There are a few good examples of public-private partnerships. The renovation of the Ministry of Finance was one of them. And now the maintenance of the Afsluitdijk.

Belgium

According to van Olphen, Belgium is doing much better: "The Flemish government set up a fund and  distanced it from the government. The government itself put €90 million into it. That was supplemented with €500 to 600 million in bank financing. And then another €1.5 billion was needed for thirty years of maintenance. That was private money that the government freed up by investing €90 million itself.”

Top investors

So, what now? According to Van Olphen and Wortmann there is indeed a solution. More opportunities to invest in Dutch public works, so that pension capital can also be invested in them. This would also provide an opportunity to make use of the knowledge and experience available in the  investment sector. APG's top investors can then start planning for investment opportunities with them at an early stage. Wortmann emphasizes that the participant’s interest is still paramount in this endeavor, of course: "This is our participants’ pension money we’re talking about. So, we will have to deal with it in a responsible way. That means that projects must also yield returns.”

Read the entire interview here

Volgende publicatie:
ABP tops Dutch pension fund sustainability ranking for the third year in a row

Just like in 2019 and 2018, APG's largest client ABP leads the Dutch VBDO sustainable pension fund ranking. The Dutch Association of Investors for Sustainable Development (VBDO) announced this today at the presentation of the VBDO Benchmark on Responsible Investments.

 

ABP scored 4.3 out of 5 points. APG's other asset management clients also performed well. BpbBOUW consolidated its second place with a 4.0 score. SPW went from fifth to sixth place (3.2 points).

Every year, VBDO examines the performance of Dutch pension funds’ responsible investment policies. The benchmark assesses the 50 largest pension funds in the Netherlands, accounting for 92% of assets managed with a total value of more than € 1.4 trillion.

Raising the bar

VBDO again raised the bar this year. New criteria were, for example, engagement with governments and reporting on positive and negative impact.

 

For more information, please download the full VBDO report here.

ABP tops Dutch pension fund sustainability ranking for the third year in a row

Volgende publicatie:
APG invests€ 170 million in bonds aimed at protecting European employment

APG invests€ 170 million in bonds aimed at protecting European employment

Published on: 20 October 2020

APG has invested € 170 million in social bonds to help European Union (EU) member states protect employment and avoid layoffs in sectors shaken by the Covid-19 pandemic. The investment - on behalf of our pension fund clients - is made through a new instrument for temporary financial assistance to member states.

 

The instrument for temporary Support to Mitigate Unemployment Risks in an Emergency (SURE) is designed to help protect people in work and jobs affected by the Covid-19 pandemic. It provides financial assistance - in the form of loans granted on favorable terms by the EU to member states - of up to €100 billion in total. These loans help member states cover the costs for the creation or expansion of national short-time work schemes and similar measures for the self-employed.

 

Commitment  

“This investment shows APG’s strong commitment to support Europe’s sustainable recovery as well as affected workers and their families,” says Sandor Steverink, Head of Treasuries at APG Asset Management. “At the same time, it offers a good risk-return perspective for our clients’ end beneficiaries.”

 

Short-time work schemes allow firms experiencing economic difficulties to temporarily reduce the hours worked by their employees, which are then provided with public income support for the hours not worked. By avoiding wasteful redundancies, short-time work schemes prevent a temporary shock from having severe and long-lasting negative consequences on the economy and the labor market. This helps to sustain families’ incomes and preserve productive capacity.

Sustainable recovery

SURE is of a temporary nature; its duration and scope are limited to tackling the consequences of the Covid-19 pandemic. Next year, the EU will start with the financing of the €750 billion recovery fund to soften the economic impact of the Covid-19 outbreak and to make the European economy structurally more sustainable.

 

The issue of hundreds of billions of green and social bonds by the EU will provide a boost to the further development of this market. “APG is already one of the world’s largest sustainable investors and the EU will become one of the largest green and social issuers in the coming years”, says Oscar Jansen, Credit Specialist at APG Asset Management. “We encourage the efforts made by the EU and want to further stimulate sustainable investing.”

 

APG recently hosted a webinar on EU sustainable recovery, which included an update on the EU’s plans by Gert Jan Koopman, Director-General Budget of the European Commission. To encourage expansion of the market,  APG has published the Guidelines for green and social bonds, which outline our expectations for companies, governments and agencies issuing such bonds.

Volgende publicatie:
“Collaboration with South Korean pension fund provides access to major, profitable investments”

“Collaboration with South Korean pension fund provides access to major, profitable investments”

Published on: 20 October 2020

APG is joining its forces with NPS (National Pension Service of South Korea) in the field of asset management. Both parties will mainly cooperate on investments in large international projects in the field of infrastructure and commercial real estate. The collaboration with the South Korean sector partner enables multiple economies of scale for APG that will lead to the ultimate objective: providing maximum pension value to customers of the pension fund and the participant.

 

NPS is the wide-ranging provider of social benefits in South Korea. The scheme is open to all South Korean employees, employers and self-employed persons. 22 million working people are currently contributing to the fund. The company also offers services in the field of financial planning and has close relationships with the government. NPS manages USD 600 billion in assets at the moment and the expectation is for this amount to grow until 2024 to USD 1 trillion.

 

The South Korean asset manager is not unknown to APG. The asset managers cooperated in two major investments this year. They acquired a share in the leading toll road operator Brisa last April and an investment in Scape Australia, market leader in student housing in Australia, followed more recently.

 

Attractive

“A collaboration with like-minded peers, such as NPS, ensures attractive investment returns for APG and our customers in pension funds and participants”, says Ronald Wuijster, member of the Board of Directors and responsible for asset management. “By cooperating, both parties gain access to new and attractive investment opportunities. Investments that are more difficult to realize by APG independently and at higher costs.”

APG enriches its investment portfolio with this partnership, but it also gives both APG and NPS greater influence and voting rights in the business operations. Ronald: “It enables us, for example, to bring up our ambitions in the field of sustainability even more assertively.”

 

Knowledge exchange

Knowledge exchange is an additional important goal of the collaboration. Ronald: “Both APG and NPS have an excellent track record when it comes to investing in real assets. We have a great deal to learn from one another. We will utilize each other’s expertise in the time to come. In this context, you should think about, for instance, the temporary exchange of investment experts.”

The alliance with NPS fits, according to Ronald, a trend in which large investors are seeking each other more often in order to increase their operational effectiveness. “We expect APG to enter into more of such partnerships in the future.”

Volgende publicatie:
APG, NPS and Swiss Life complete acquisition majority stake in Portuguese toll road operator

APG, NPS and Swiss Life complete acquisition majority stake in Portuguese toll road operator

Published on: 14 October 2020

The acquisition of a majority stake in Brisa – Auto-Estradas de Portugal by APG, the National Pension Service of the Republic of Korea and Swiss Life Asset Managers, was closed today after receiving the approval of European regulatory authority. Brisa is a leading European toll road platform with a network of over 1,500 km, covering the fundamental axis of the Portuguese road system.

 

More information? Read press release here.

Volgende publicatie:
APG invests in start-ups and ‘smart heating grids’ on behalf of ABP for energy transition

APG invests in start-ups and ‘smart heating grids’ on behalf of ABP for energy transition

Published on: 13 October 2020

APG has made the first investments for pension fund ABP in the energy transition fund ANET. ABP announced today to invest 45 million euro in the development of ‘smart heating grids’. This investment shortly follows an investment of 7.5 million euro made in the beginning of October in fifty innovative Dutch startups. ANET was established in 2019 with the objective of stimulating sustainability in the Netherlands.

 

A smart heating grid combines several sustainable heat sources for the heating of houses, factories and offices and this way contributes to lower CO2 emissions. ABP is investing through the specialized investor Asper Investment Management in the fund ‘Dorothea’. That fund is focusing on the exploitation and development of smart heating grids, meaning entire residential areas will be able to eliminate the use of natural gas.

 

Rockstart

ABP reserves 250 million euro to begin with for small-scale initiatives in the field of sustainable energy. For the investment made in the 50 Dutch startups, APG also collaborates with a specialized party. The specialized party in this case is Rockstart, a fund manager that intensively guides and supports promising young businesses with financing, knowledge and access to relevant networks. Jeroen Schreur, together with his team, is responsible for ANET on behalf of APG Asset Management: “Rockstart offers us capacity and access to innovative startups that contribute to the Dutch energy transition we don’t seem to have time for ourselves.”

 

Selection procedure

The portfolio of the so-called Rockstart Energy Fund is built gradually by adding ten startups to the portfolio every year by means of a careful selection procedure. Rutger van Wersch, portfolio manager ANET: “The first selection by Rockstart takes place this month. It is therefore not yet possible at this time to say exactly which startups will end up in the portfolio. What we do know is that these startups contribute to the digitization of the energy transition by means of data applications and digital technologies. From energy-efficient houses (smart homes) and with smart meters driven by artificial intelligence to software for grid operators helping them to control the energy network of the future.”


Risks

Startups are relatively risky investments, Schreur acknowledges. However, the expected returns sufficiently outweigh the risks. “We expect a number of startups to grow into a ‘normal’ company with a reasonably stable annual turnover and profit. But it’s true that a part of the startups will not survive. Our modelling of the expected returns is based on conservative historical data in terms of their success rate. We concluded that we are sufficiently compensated for the risks we take.”

 

Venture capital

The Rockstart Energy Fund is also one of the six funds able to make a claim to the Seed Capital scheme of the ministry of Economic Affairs and Climate (Dutch ministry of EZK). Private investors and the government together fill funds for startups in this scheme, to which the government contributes a maximum of 50 percent. Of the 67.5 million euro new venture capital, 32 million originates from the Dutch ministry of EZK. Five million of that amount has been awarded to the Rockstart Energy Fund.

Volgende publicatie:
Unprecedented EU support program with green and social bonds

Unprecedented EU support program with green and social bonds

Published on: 8 October 2020

Important role for investors like APG

 

The European Union (EU) is going to issue green and social bonds on a large scale to pull the European economy out of the corona hole. At the same time, the EU is taking the opportunity to make the economy structurally sustainable. But these bonds will have to meet specific criteria, experts stated during a webinar organized by APG.

 

The EU is going to borrow a total of 750 billion Euros in the next few years, for the recovery and greening of the European economy. A big part of this – about 350 billion Euros – will be retrieved through the issuance of green and social bonds, Gert Jan Koopman, director-general Budget of the European Commission, said to an audience of European investors, officials, regulators and central bankers.

 

The financing of the first part of the recovery program will start in October with the issuance of maximum 100 billion Euros in social bonds under the so-called SURE Program. Next year, the EU will continue  to finance the European Recovery Fund, part of which will be issued through green bonds. The revenue from this will be used to soften the economic consequences of the corona outbreak, for example by financing companies and supporting employees who have lost their jobs.

 

Investors cautiously optimistic

European investment experts from ING, the French AXA Group, the Danish pension fund ATP, ABP and APG are being cautiously optimistic. The issuance of hundreds of billions of green and social bonds will provide a significant boost to the further development of this market. “European green and social bonds are important to us and to our clients, because they fit in well with the sustainable and responsible investment policy,” Sandor Steverink, Head of Treasuries at APG, states. “With these investments in these types of bonds, we want to contribute to the Sustainable Development goals.”

 

Geraldine Leegwater, ABP board member, shares that conclusion, but also states that green does not mean that returns will be less important. “The great demand for green bonds will also drive the price up. That premium will have to be recouped,” the ABP director says. “We evaluate green and social bonds not only for sustainability, but also for risk, return and costs.” At the end of 2019, ABP had 7.6 billion Euros invested in green, social and sustainable bonds.

 

Develop a standard

And then there is the question of what qualifies a bond as being “green” or “social”. There is no clear answer to that question yet, the experts conclude. According to Pascal Christory, Chief Investment Officer of AXA Group, institutional asset owners need to play a more pivotal role in setting the standards for the green bonds they invest in. “This way we can ensure these investments match our long-term ESG and risk-return objectives.”

 

APG has already developed guidelines for green and social bonds, says Steverink. They clarify what our expectations are for companies, governments and agencies that are considering issuing green and social bonds.

Volgende publicatie:
Sustainable bond investment empowers US Black and Hispanic communities

Sustainable bond investment empowers US Black and Hispanic communities

Published on: 6 October 2020

APG has invested $50 million in a sustainable bond that addresses income and social inequality in America’s Black and Hispanic communities. The proceeds of this bond - issued by Bank of America - will mainly be used to finance projects for affordable housing and socio-economic advancement.

The ‘Equality Progress Sustainability Bond’ is unique in that it explicitly targets social and economic disparities in underserved minority communities, says Joshua Linder, Credit Analyst Fixed Income at APG Asset Management. “America’s Black and Hispanic communities have been especially hard hit by the Covid-19 crisis. As a result, these disparities have widened. We find the use-of-proceeds impactful as it addresses a number of specific and clearly identified inequalities.”  

Reducing disparities

One such disparity is home ownership, which is widely considered important to social stability and the accumulation of wealth. Research indicates that only 47% of Black families and 51% of Hispanic families own their homes, compared to 76% of White families. Home buyers in these communities also tend to get less favorable mortgage provisions. The proceeds of the bond will be used, among other things, to expand mortgage lending for single or multi-family housing.

Other uses of the $2 billion proceeds include loans and investments in affordable housing, financing for medical professionals to expand medical services in areas with large Black and/or Hispanic populations, and investments in Black and Hispanic owned or operated businesses. As a sustainable bond, the investment finances a mix of social and green projects, including renewable energy and clean transportation projects.

Leading green bond investor

“This was a good investment opportunity because we find Bank of America attractive from a credit perspective and have been engaging with them for a long time on green, social and sustainable bond issuance,” says Joshua. The sustainable bond has outperformed both comparable Bank of America bonds and its peer group since it was issued.

Sustainable bonds are issued by companies and (semi-)government agencies for the funding of a mix of green and social projects. APG is one of the world’s largest investors in green, social and sustainable (mixed) bonds; at the end of 2019, we had invested € 9 billion in such bonds on behalf of our pension fund clients ABP, bpfBOUW, SPW and PPF APG. To encourage development of this market, APG has published the Guidelines for Green, Social and Sustainable Bonds, which outline our expectations for companies, institutions and governments issuing such bonds.

Volgende publicatie:
Investors unite: contributing to the Sustainable Development Goals together

Investors unite: contributing to the Sustainable Development Goals together

Published on: 14 September 2020

The SDI Asset Owner Platform is a much-needed piece in the puzzle of how investors can contribute to the Sustainable Development Goals. It allows members to determine which investments do and which of them do not advance the 17 goals, which include climate action, good health and wellbeing and affordable clean energy. This was the conclusion of experts from various continents who participated in the platform’s online launch event on 10 September.

 

“The SDI Asset Owner Platform (SDI AOP) is more than just another sustainable investing initiative,” says Claudia Kruse, who heads up APG’s Global Responsible Investment & Governance team. “Led by asset owners, it focuses specifically on the Sustainable Development Goals (SDGs), and shows how companies’ products or services contribute to them. Processing unstructured data with artificial intelligence and natural language processing technology allows for broad coverage of global capital markets portfolios. Based on audited financial metrics, the data is objective and classifications are rules-based and auditable.”

 

The SDDs matter to us as a long-term investor, says Andrew Gray, Director ESG & Stewardship at AustralianSuper and founding member of the SDI AOP, together with APG, PGGM and BCI. “We believe that companies that contribute to the goals can be well positioned for a future economy that is aligned with the SDGs, and therefore represent attractive investment opportunities.”

The SDI AOP is a wonderful example of how we can do more together than individually

The lack of quality data to define contributions to the SDGs has long been an impediment to investors. “The information offered by the SDI AOP enables us to identify investment opportunities and establish to what extent our portfolio contributes to the SDGs,” says Gray. “It also makes our engagement with companies much more concrete by bringing objective, comparable data into the conversation. In the future,  it may also help us improve our product offering to members, for example by offering them a sustainable investment option based on positive contributions of companies to the SDGs rather than – as they historically have been – on exclusion.”

 

Easy-to-use and cost-efficient data

 

The SDGs are no longer a side industry of the financial services community, but have become front and center. Asset owners have been struggling to make the SDGs part of their standard investment processes, says Ian Webster, Senior Managing Director at distribution partner Qontigo. “The SDI AOP creates a set of easy-to-use and cost-efficient data that can be incorporated into existing tools for investment decisions and reporting. In this way, the SDI AOP allows for a very wide set of use cases and continuous development in the future.”

 

The launch of the SDI AOP comes at a critical time, says Fiona Reynolds, CEO of the Principles for Responsible Investment (PRI). “The SDGs are the world’s business plan for a greener, more inclusive and sustainable future. And the SDI AOP is a much-needed piece in the puzzle of how we as investment community can advance the SDGs. It will help translate the SDGs into investment goals and make sure that investors and corporates have a standardized way of reporting. The SDI AOP is a wonderful example of how we can do more together than individually.”

 

Would you like to know more about the SDI Asset Owner Platform? Please get in touch at sdi@qontigo.com

Volgende publicatie:
APG invests in unique hotel location in the heart of London

APG invests in unique hotel location in the heart of London

Published on: 10 September 2020

The Wellington Block is located just a two-minute walk from Covent Garden, in the well-known theater and entertainment West End area of London. APG is investing in the redevelopment of this special site in joint venture with London Central Portfolio (LCP). Purchase price 84.4 million Euros.

    The Portfolio Club (“TPC”), a joint venture between APG and LCP, purchased the attractive hotel property in the heart of London from the British real estate company Capco. In total, TPC is purchasing six buildings that are connected to each other and together form the Wellington Block.
    Planning approval has recently been obtained for the Wellington Block to be redeveloped and expanded into a hotel with at least 146 rooms and a shopping and restaurant section. It is expected that the hotel will open its door to its first guests in 2023.

Unique location


In addition to the unique location, the hotel will also differ from other hotels in other ways, according to Foortse. “With this hotel concept, we are focusing on a wide public at this location: from tourist to business travelers and from a one-night stay to several weeks or even months. The rooms also have their own cooking area, in addition to the usual facilities.”

By focusing on several target groups, the hotel will be less sensitive to big fluctuations in, for example, the number of tourists or business travelers. Foortse: “Particularly in these uncertain times, these kinds of formulas have proven their relative strength.” 

 

Strong formula


Naomi Heaton, Chief Executive of TPC also believes in the formula. With the combination of beautiful architecture and a top location, she believes a broad target group is being addressed; from national to international.

In addition to the Wellington Block, TPC also has a second hotel site at another sought-after location in Central London. At the end of 2019, the APG and LCP joint venture purchased Harrington Hall in South Kensington. The 237 rooms at Harrington Hall are currently being renovated according to the same concept as Wellington Block. The expected reopening of Harrington Hall is at the end of 2021. Foortse: “We hope to expand our portfolio in London even further in the coming period.”

Volgende publicatie:
APG invests in sustainable batteries for electric cars

APG invests in sustainable batteries for electric cars

Published on: 3 September 2020

Over € 2.5 billion – that is how much the Swedish company Northvolt has collected for research and development and the construction of two gigafactories for sustainable lithium-ion batteries for electric cars. € 1.35 billion of that was recently received from a group of international financial institutions. APG also participated in that financing round – on behalf of their client ABP. Peter Carlsson, CEO of Northvolt:  “The momentum for electric cars is stronger than ever.”

 

Northvolt was founded by two former Tesla managers in 2016, in order to contribute to the transition to clean energy in Europe. With the € 1.35 billion that Northvolt recently collected – in loans – the company wants to build two gigafactories for sustainable lithium-ion batteries: one in Sweden (“Northvolt Ett”) and one in Germany (“Northvolt Zwei”).

 

BMW

Lithium-ion batteries are used in electric cars and play an important role in the transitions from fossil fuels to sustainable energy. Northvolt is the biggest manufacturer of this type of battery in Europe. Northvolt already has a deal with BMW for the batteries that Northvolt Ett will produce. The German car manufacturer will be buying as much as € 2 billion worth of batteries from 2024 on. This will make Northvolt the third biggest supplier to BMW, after the South-Korean Samsung SDI and the Chinese CATL.

The momentum for electric cars is stronger than ever, says Peter Carlsson, co-founder and CEO of Northvolt. “Our clients need large amounts of high-quality batteries with a low CO2 footprint. Europe has to build its own production facilities for this.”


Political pressure

Carlsson is referring to the increasing political pressure the German car manufacturers are under to safeguard their battery supply by attracting suppliers from the European Union too. The European Investment Bank (EIB) has already provided a €350-million loan to Northvolt Ett for this purpose. Previously, the EIB had already supported Northvolt Labs, which produced the first battery cells, which created the foundation for the gigafactory.

 

Start in 2021

Northvolt Ett will be built in Skellefteå, in northern Sweden and will run completely on renewable energy. The factory will start production in 2021 and is expected to provide 40 gigawatt hours (GWh) of energy a year. This will power approximately 15,000 electrical cars for a year. Northvolt Zwei in Germany will be built in collaboration with car manufacturer Volkswagen. This factory, which is expected to supply 20 GWh a year, will start production in 2024.

 

The investment in Northvolt fits in with two long-term trends that ABP wants to take advantage of with its sustainable and responsible investment policy: the transition to sustainable energy and responsible use of raw materials by recycling and other means.

 

 

Volgende publicatie:
Green sovereign bond investment contributes to Swedish climate ambitions

Green sovereign bond investment contributes to Swedish climate ambitions

Published on: 2 September 2020

APG has invested 25 million in the first green Swedish sovereign bond on behalf of its pension fund clients. Sweden will use the proceeds to finance measures that contribute to its ambition for a carbon neutral economy in 2045.

 

Green bonds are issued by companies and (semi-)government agencies for the funding of sustainable projects. The Swedish bond has received the ‘dark green’ label from the independent green bond rating agency Cicero. This means that the green bond meets the highest standards in terms of use of proceeds and impact transparency. The green bond’s expected return is comparable to the return of a regular (‘grey’) Swedish sovereign bond.

 

Green transportation

APG has been assigned SEK 225 million (roughly € 25 million). In total, Sweden has raised over € 1.9 billion with the issuance of its first green sovereign bond. The money will be used, among other things, to fund sustainable transport. Domestic transport accounts for one third of Sweden’s total carbon emissions. The bond’s proceeds can be used for investment in for example public transport, electrification of the automobile fleet and digital solutions for reducing the number of transport movements.  

 

Contribute to sustainability ambitions

The investment in this green bond contributes to our pension fund clients’ responsible and sustainable investment ambitions. ABP, our largest client, aims to have at least 20% of its assets invested in companies or projects that contribute to the Sustainable Development Goals (SDGs) by 2025. BpfBOUW has the goal to invest € 12 billion in the SDGs by the end of this year. The SDGs were set by the United Nations in 2015 and focus on, among other things, sustainable cities, affordable and clean energy and climate action.

 

Large green bond investor

APG is one of the world’s largest green bond investors. Previously, we participated in the issuance of green sovereign bonds by the Netherlands, France and Ireland. At the end of 2019, we had invested € 9 billion in green, sustainable and social bonds on behalf of our pension fund clients ABP, bpfBOUW, SPW and PPF APG. To encourage further development of this market, APG has published the Guidelines for Green, Social and Sustainable Bonds. This document outlines our expectations for companies, institutions and governments that consider issuing green bonds.

 

 

Volgende publicatie:
APG and Asper expands Nordic wind platform; 60 MW added

APG and Asper expands Nordic wind platform; 60 MW added

Published on: 31 August 2020

APG and Asper have started construction of a new onshore wind project in their Swedish wind platform. The 60MW Raftsjöhöjden wind farm is owned and financed by APG for Dutch pension funds ABP and PPF. It is the fifth project in the Asper platform to be backed by APG, whose Swedish portfolio now comprises 494MW, with an annual expected production of 1.6TWh. Enough electricity to power 320,000 Swedish households.

 

The wind park is located outside Östersund in central Sweden. The project was developed by Vasa Vind - a portfolio company managed by Asper - who will also manage the construction and local operations of the wind park. The project will utilize 11 GE 5.5MW – 158m turbines. GE will also provide a long-term service agreement for the project.

 

We are delighted to build up and see our Nordic platform grow further. Together with Vasa Vind and GE, we have engineered and optimised this project to make it an accretive addition to the existing APG portfolio” said Allister Sykes, Director at Asper Investment Management.

 

Dirk Hovers, Senior Portfolio Manager at APG, adds: “This is our fifth investment in Nordic wind with Asper and Vasa Vind. Nordic power is a strategic area for our infrastructure investments in renewable energy and we are looking forward to work on this and other successful projects with our partners at Asper and Vasa Vind.”

Volgende publicatie:
COVID-19: First place for APG in responsible investors ranking

APG tops COVID-19 response ranking

Published on: 26 August 2020

The Responsible Asset Allocator Initiative (RAAI) has analyzed how 25 leaders in responsible investing are responding to the COVID-19 crisis. Topping the list is APG, which scores 100% on the criteria examined.

 

The Responsible Asset Allocator Initiative (RAAI), a US initiative focused on mobilizing capital from the world’s largest institutions to responsible investing and the Sustainable Development Goals, examined the role of the 25 investors they consider to be the leaders in responsible investing. APG was awarded maximum scores on all criteria, such as supporting companies to take socially responsible actions even if that could affect short-term performance, joining forces with other investors and investing in Covid-19 solutions. PGGM also received maximum scores on all criteria.  

 

Prompt action

APG played an active role in combatting the consequences of the Covid-19 crisis right from the start. In March, APG and other institutional investors urged companies to take what steps they can to mitigate the social impact of the corona crisis, and make employee health and safety their number one priority. APG demanded, for example, that Amazon account for worker safety measures during the pandemic, following reports that sick Amazon employees were being pressured to come to work. Addressing the economic consequences as well, the investors stressed that companies should aim to prevent workers, suppliers and customers from being faced with financial problems.

 

Investing in Covid-19 response bonds

APG, on behalf of its pension fund clients ABP, bpfBOUW, SPW and PPF APG, invested in the first Covid-19 bond – issued by the Nordic Investment Bank – and many more after that. “To date we have invested over half a billion euros in Covid-19 response bonds,” says Oscar Jansen, Credit Portfolio Manager at APG Asset Management. “The proceeds of these bonds are used to support both health care and the economy. They help fund emergency health measures such as expanding test capacity, training medical personnel and procuring protective medical equipment, as well as support packages for small and medium-sized enterprises in Europe and elsewhere.”

 

The bonds offer an attractive return as well. “In most cases,” Jansen explains, “APG invests in Covid-19 bonds issued by reputable institutions with solid credit ratings (AA or AAA). The credit risk of AAA-bonds is comparable to the risk of Dutch sovereign bonds, while the interest rate is slightly higher than that of similar bonds.”

 

Guidance

To boost the issuance of Covid-19 bonds, APG has published a guidance document that outlines its criteria for bonds to be qualified as social or sustainable bonds. It has been shared with bond issuers, encouraging them to step up issuance of high-quality Covid-19 bonds. “As one of the world’s largest investors in green, social and sustainable bonds,” Jansen concludes, “we want to take our responsibility to continue supporting Covid-19 response funding in a responsible way.“

 

More about the RAAI ranking:

https://www.top1000funds.com/2020/08/asset-owners-adapt-and-respond-to-covid/

Volgende publicatie:
Peter Branner on responsible investment in times of Corona

Peter Branner on responsible investment in times of Corona

Published on: 29 July 2020

“Sustainability and digital transformation are becoming more important than ever”

The corona crisis initially hit the investment portfolios of APG hard in March and it also came with many opportunities for active investors like APG. Peter Branner, Chief Investment Officer APG Asset Management, looks back on an eventful first half of the year 2020.

 

A rollercoaster: that could be the way to describe the first period of 2020 for the investors. A good return of 17.3 percent was achieved in 2019. After that peak, the financial markets significantly dropped this spring, but then recovered remarkably in the second quarter. With steering and counter-steering, looking ahead and thinking in scenarios, Chief Investment Officer Peter Branner tried to meet the challenges in the best possible interest of pension fund clients.

 

The corona crisis led to a dramatic fall in share prices on the stock markets: panic?

“There was indeed panic in the financial markets but not for us. As a long-term investor we took a few deep breaths after which we calmly took on the challenges presented to us. Our response to the crisis was a three-stage rocket. The first priority was to take care of sufficient funds available to pay the pensions and respect our other financial obligations. Every day, I closely monitored our liquidity position, the hedging levels, the VIX (indicator of equity market volatility), oil prices and the USD as these numbers gives a good sense of the market situation. And I still do. We witnessed major movements in the dollar rate and immediately to action where needed. The oil price dropped as well and we even saw a negative oil price arising in the beginning of April: people buying barrels of oil actually received money because of a dramatic drop in consumption. We had foreseen this development and adjusted our futures contracts in time.”  

 

What was part two of the rocket?

“Being active investors, we constantly adjust our portfolios also and precisely in a crisis that makes sense. We consequently had a higher turnover in our equity and credit pools where pension fund client are given access to active portfolio management at APG. The industries that would be affected negatively quickly manifested themselves during the lockdown, such as energy companies and travel operators. That is the reason why we reduced our exposure to cruise companies. On the other hand, we purchased shares of companies benefiting from the crisis, such as DIY companies, providers of home entertainment, online retailers, and holiday resorts. We thoroughly assessed all companies included in our investment portfolios: will they be affected by the crisis only temporarily or permanently? And how vulnerable are these companies, for example because they purchase their goods far away? We are now mainly focusing on companies that will survive the crisis just as strong or even stronger as they were before.”

       

Does this mean the crisis also offers opportunities?

“Definitely. We purchased shares and credit instruments in companies that decreased in value due to the crisis, but we expect are strong enough to survive, such as specific automotive manufacturers. Some companies became inexpensive to an extent we repurchased the shares, such as cruise companies. Even if these companies are in for a difficult period ahead our portfolio managers found the reduced prices extraordinary attractive. In Asia, we mainly invested in IT and Internet companies. A global supplier of restaurants had also been on our wish list for quite some time. Those shares were always too expensive, but as the catering business collapsed, we were now able to purchase those shares all of a sudden. Several of these examples shows the benefit of being a long term investor avoiding behavioral bias.”

 

What truly made you awake at night?

“That brings me to the third stage of the rocket: in addition to shares, APG also invests in private companies, real estate and infrastructure. Those investment decisions require a long period of preparation. Compare it to how you privately should take time to decide on major purchases, such as a car or a house. Moreover, you first want to see it for yourself: be able to kick the tires or check the window frames for wood rot. But the crisis made it impossible for us to check out those companies and building projects ourselves. The pipeline for investments is still filled pretty well, but how long will it take for that to run dry? That concerns me. We need new supply in order to also realize returns in the future. Or find new ways to do the due diligence.

 

Secondly I am obviously worried for our people. It’s been a while since many have had a normal day in the office. I spend a lot of time in digital coffee breaks with old and new colleagues to support them. I am very proud of the organization but we need to keep up the spirit.”

 

APG is a responsible investor. How was that expressed during the crisis?

“First of all, we purchased Covid 19 bonds for an amount of over half a billion euros on behalf of our pension fund client: that money is used to support care institutions and SMEs suffering the consequences of the crisis. Those bonds also produce returns by the way. We further looked at each company to see whether our support as a shareholder was necessary and desired, for example with some additional capital or by refraining from the payment of dividend. We also held companies accountable for their approach of the crisis. Such as Amazon, because of the corona infections in their warehouses. We always communicate with companies about the way in which they are being managed, their social policies and the way they handle the environment. The crisis intensified those conversations even more. Being a responsible investor requires credible hands-on activity.”

 

APG invests the assets of pension funds, such as ABP and BpfBouw. How often did you interact with one another in the past couple of months?

“On a daily basis where needed and by means of a call every week where agreed. Prior to the crisis that frequency was more like once every two weeks or every month. As an administrative organization, the pension funds provide us with a mandate: what we can and cannot invest in, the level of risk we are allowed to take and the allocation across the different investment categories, such as shares, bonds and real estate. Fluctuations can easily arise due to price falls and other market movements. Moreover, as an investor you want to be more active in purchasing and selling equities during a crisis. Those are the matters you discuss together. In general, we were able to work with those mandates really well. The big picture is clear: together we strive for a balanced portfolio and limited risks in order to achieve solid investments result in the long term.”

 

What does the balance look like after this semester?

“This differs per market and investment category. In the Western developed markets, we see a modest recovery after the initial struggle, and we are happy with that. For our real estate portfolio, on the other hand, this was not a good half year: performance is lagging behind market but there are also some more technical reasons with the benchmark that we need to explain carefully to clients. I am less worried about the longer term performance but even our five year numbers require specific and precise communication. Emerging economies are struggling, which is worrying for both humanitarian and investment reasons. By the way, China is emerging stronger from the crisis: that country came faster out of the lockdown and is also undergoing a digital transformation that is much more advanced than one might expect. This will help China enormously in the years to come.”

 

Should participants be concerned about the consequences of the crisis for their pension?

“Unfortunately, we probably cannot show the same investment result this year as in previous years. However, stock markets have shown remarkable recovery and resilience since mid-March due to the strong liquidity support from central banks and forceful financial stimuli from governments. In addition, we have a long-term investment horizon, so we can spread lower returns over time. There are many reasons for participants to be concerned about the corona crisis, the future pension system, purchase power and the risk of social unrest. Many of these risks are there for the longer term and as long-term investors we can only do our best to assure participants that we take our responsibility very serious.”

 

How do you perceive the future?

“Economic recovery is only possible once the virus is gone or a vaccine is available. As an investor, we apply different scenarios, ranging from favorable to worst case: The Good, the Bad and the Ugly. We already try to look beyond the crisis. If people continue to work from home more often, what will be the consequences for office spaces, the activity on highways and railways? We have noticed an acceleration of the digital transformation and the awareness of sustainability. Those two megatrends will become even more leading in our investment policy. The corona crisis has changed the world forever. And we change with it.”

Volgende publicatie:
'I don't doubt for a second what I'm asking of companies'

'I don't doubt for a second what I'm asking of companies'

Published on: 10 July 2020

With a background in student activism and investment banking, Yoo-Kyung (YK) Park is driven to change corporate Asia for the better. She’s been at it for eleven years, and is by no means less committed. Are there differences between Asia and other continents when it comes to engaging with companies about their behavior? ‘There is a big difference between the various countries in Asia. There are developed countries, such as Japan, Singapore and Hong Kong, and developing countries, which include China, India and South Korea. What they all have in common, though, is that their ESG standards are still under development.’

An interview with Yoo-Kyung Park, Head of Responsible Investment & Governance Asia-Pacific at APG

 

‘Some practices that we take for granted in Europe, are not so common in Asia. In Europe, for example, if you want to engage with a company, you can talk to senior management or even board members and you tend to get the information you need. To get this type of access in Asia, you need to invest a lot of time and effort to build trust. Only after several years will board members open to you. I have been engaging with Samsung Electronics on various corporate governance issues for eleven years. Although the company has made positive changes, I am still not done talking to them.’

 

How receptive are Asian companies to what you ask of them?
‘It depends on what you’re asking. If you want a company to improve its reporting, you can talk to the Investor Relations department, and there’s a good chance they will respond to your request. But if you want a company to change its corporate culture, or deal with bribery and corruption, it’s not that straightforward, especially if our holding in the company is relatively small. In such cases it’s not easy to get access. So you have to be resourceful and come up with other ways to gain influence. I then seek cooperation with other parties, such as politicians, diplomates, NGOs, or the media.’

 

How do you find a way to deal with more sensitive topics, such as human rights?
‘That also depends on the country. In Japan, you can talk about human rights, but in China you need to come up with less direct ways to address this. You have to make the topic about, for example, employees’ health & safety, or working conditions for migrant workers. You need to make it specific. And you always link it to the impact it can have on a company’s business. When I talked to Korean shipbuilders about fatal accidents in their operations, and did not get a satisfactory response, I alerted their clients, the large ship buyers, to this issue. They were concerned about safe working conditions and called on the shipbuilders to improve them. Several oil companies have now paid more attention to the safety standard for Korean shipbuilders.’

 

I want change. I don’t just want to keep talking for the sake of talking.

Is the fact that you are a woman an impediment in some countries?
‘It was and still is. There are some very conservative countries. For example, when I organize a meeting with executives or policy makers in countries like Japan and South Korea, all the others in the room are men. I am not expected to ask questions in such an environment. I find that I have to push harder and make a bigger effort to get my message across. But I don’t mind. It’s my message that’s important.’

 

You have been in this job for over a decade. What keeps you going?
‘I want change. I don’t just want to keep talking for the sake of talking. I see hope for Asia. The culture and mindset of board members are changing and we have managed to make concrete changes for the better. What gives me courage is that I know I always have the backing of APG and its pension fund clients. I know that they are genuinely committed to change. As a result, I have zero doubt in what I ask from companies.’

On behalf of APG as a global pension investor, Yoo-Kyung Park engages with companies on environmental, social and governance issues to push for improvement. You can read more about this in our Responsible Investment Report for 2019.

 

 

Volgende publicatie:
APG co-launches platform for investments in Sustainable Development

APG co-launches platform for investments in Sustainable Development

Published on: 6 July 2020

APG and other global investors have established the Sustainable Development Investments Asset Owner Platform (SDI AOP). Applying pioneering technology, the platform enables investors to assess companies on their contribution to the Sustainable Development Goals (SDGs). These goals, set by the United Nations in 2015, aim for a better, more prosperous world by addressing global issues such as clean water, good healthcare, and protecting the environment.

 

APG and PGGM, which announced their cooperation to set up the SDI Asset Owner Platform in September 2019, have recently been joined by AustralianSuper and British Colombia Investment Management Corporation (BCI). Collectively, the launching partners have over US$ 1 trillion in assets under management.

 

Solving data challenges


Investments in companies whose products or services contribute to the realization of the SDGs are called Sustainable Development Investments (SDIs). An increasing number of global investors aim to understand the contribution they make, through their investments, to the Sustainable Development Goals. But a lack of quality data to identify contributions to the SDGs has been an impediment for them. The SDI Asset Owner Platform’s measurement framework helps investors to imbed the SDGs into their investment processes and allows them to shift more capital to the SDIs. It also enables them to report to their clients and external stakeholders transparently and consistently.

 

Global standard


“Launching this standard with asset owners from three continents shows our commitment to contribute to the SDGs”, says Claudia Kruse, Managing Director and heading up APG’s Global Responsible Investment & Governance team. “This is part of our commitment to our clients on whose behalf we invest in order to provide affordable pension in a sustainable world.”

The SDI Asset Owner Platform provides a common definition, taxonomy, and data source for investments in the SDGs.

Powered by Artificial Intelligence technology, data science company Entis generates SDI classifications for 8,000 companies to date. The SDI definition and taxonomy are public and equally applicable to private market investments. The SDI classifications will be available through Qontigo.

 

Commitment to the SDGs


APG co-launces this initiative on behalf of its pension fund clients. Our two largest clients have set ambitious targets for investing in the SDGs; Dutch civil service pension fund ABP aims to invest 20% of assets under management in the SDGs by 2025 whereas Dutch builders pension fund bpfBOUW targets to have €12 billion in SDIs by the end of 2020.

 

“Together we are leading the way in sustainable investing”, says Claudia. “The SDI AOP welcomes investors across the globe to subscribe, creating a critical mass of investors who together define the meaning of investing in the SDGs.”

 

View the press release

Volgende publicatie:
Claudia Kruse in conversation with Jort Kelder

Volgende publicatie:
APG invests over half a billion in Covid-19 bonds

APG invests over half a billion in Covid-19 bonds

Published on: 20 May 2020

To combat the Covid-19 pandemic and its socio-economic impact, APG on behalf of its pension fund clients has now invested well over €500 million in Covid-19 response bonds. The proceeds of these bonds are used, among other things, to fund emergency health measures and support packages for small and medium-sized enterprises in affected countries.

 

APG – on behalf of ABP, bpfBOUW, SPW and PPF APG – recently participated in the issue of Covid-19 bonds by UNEDIC (€50 million), BPI France (€28 million), Instituto de Credito Official (€25 million) and Bank of America (€32 million). The proceeds of these bonds are earmarked for financing a range of measures, including expansion of healthcare services, support to small and medium-sized enterprises (SME’s), as well as a temporary increase in social security expenditures.

 

Rapid growth

In euro terms, APG since late March has invested €554 million in Covid-19 response bonds. In late March, the Nordic Investment Bank issued the first bond specifically intended to combat the Covid-19 pandemic and its impact. Since then, many sovereigns, supranational organizations and agencies – as well as a limited number of corporates - have followed. In just a few months, the Covid-19 bond market has reached an estimated €60 billion. The market is likely to keep growing, as governments and companies rush to issue debt to help ease the effects of the pandemic. 

 

In most cases, APG invests in Covid-19 bonds issued by reputable institutions rated AA or AAA. The credit risk associated with AAA-bonds is comparable to the risk of Dutch sovereign bonds, while the coupon rate is slightly higher compared to similar bonds.

 

Responsible investor

It is good that institutions issue special Covid-19 bonds, says Oscar Jansen, Credit specialist at APG Asset Management. “The societal and economic impact of the pandemic is huge and a lot of money is needed to fight the crisis. As a responsible investor, we want to play an active role in this.”

 

APG is one of the world’s largest green bond investors. These are bonds issued by companies or (semi-) governments to finance green, social or sustainable projects. By the end of 2019, we had invested over €9 billion in green, sustainable and social bonds. These investments also contribute to our clients’ ambitions in the area of sustainable investment, in particular the aims of ABP (20% of AUM in the Sustainable Development Goals by 2025) and bpfBOUW (€12 billion by the end of 2020).

Volgende publicatie:
APG urges Amazon to be transparent on employee health and safety measures

APG urges Amazon to be transparent on employee health and safety measures

Published on: 15 May 2020

APG, together with the New York City Comptroller and the New York City pension funds, calls on Amazon to report on the progress of initiatives to keep its employees safe in times of COVID-19. Whereas Amazon recently announced a multi-billion dollar spending package to protect its workers, the latter remain fearful about coming to work.

 

Reportedly over 50 Amazon facilities have confirmed cases of COVID-19, as hundreds of Amazon workers around the globe participate in protests, strikes, and petitions calling on the company to do more.

 

The New York City Comptroller (the city’s Chief Fiscal and Auditing Officer), the New York City Pension Funds, and APG, on behalf of its pension fund clients, sent a joint letter to Amazon, urging the company’s independent directors to be transparent about employee health and safety initiatives amid the COVID-19 pandemic. The letter requests that the Chair of the Committee responsible for overseeing employee health and safety, report on the progress of these initiatives and investments at the annual shareholder meeting on May 27, 2020.

 

Amazon recently disclosed its plans to spend approximately $4 billion (around € 3.7 billion) in the second quarter of 2020 on corona virus-related expenses, “including investments in personal protective equipment, enhanced cleaning of [its] facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop [its] own COVID-19 testing capabilities.” However, media reports indicate that many Amazon employees remain fearful about coming to work and concerned for their own safety as well as that of their families, coworkers and customers.

 

“Keeping people safe and healthy should be the first priority of any company and the pandemic requires business leaders to take swift, effective measures to do just that,” says Anna Pot, Head of Responsible Investments Americas for APG. “While we welcome Amazon’s announcement to invest in protecting their sizeable front-line workforce from the spread of COVID-19, we want assurance that these investments actually lead to better outcomes for their employees – that they are safer and healthier as a result.”

 

The NYC Comptroller, the NYC Funds, and APG raise concerns about the potential disconnect between management’s reported employee initiatives and media reports on widespread health and safety concerns among Amazon employees, including reports that the company has retaliated against some employees and is pressuring sick employees to come to work. As of February 28, 2020, the New York City Pension Funds and APG have €3.9 billion invested in Amazon on a combined basis.

 

“Rather than reporting on inputs such as the number of masks provided or employees tested,” says Anna Pot, ”we are interested in the outcomes of these investments, such as trends in reported cases of corona virus among employees, days lost due to COVID-related illness, complaints filed, impact on productivity and employee morale and workplace culture.”

 

To read the full letter from The NYC Comptroller, NYC Funds, and APG, click here.

Volgende publicatie:
Guidelines for making real estate more sustainable beneficial for pensioners

Guidelines for making real estate more sustainable beneficial for pensioners

Published on: 11 May 2020

In the Carbon Risk Real Estate Monitor (CRREM) project, APG, PGGM and other investors have taken another step forward in the development of a global method that measures whether a building meets the objectives of the Paris Climate Accord. It is now clear for just about every type of property in a large number of countries how much carbon per square meter they are allowed to emit annually until 2050 in order to stay within those targets.

 

These so-called 'pathways', or carbon reduction roadmaps, also show how much energy can be used in a building to stay within the Paris targets. That is valuable information for real estate investors and owners, says Mathieu Elshout, Senior Director Private Real Estate Europe at PGGM. “Through our private real estate portfolio, we have invested in approximately 4,000 properties worldwide. Now we can measure exactly how much our buildings are allowed to emit in the timeframe to 2050 in order to stay below the curve of the targets of the Climate Accord. That way you also know when investments are needed in insulation and new installations, for instance."

 

Guideline


The new system is a useful planning and risk management tool, agrees Derk Welling, Senior Responsible Investment and Governance specialist at APG. “It takes time and money to make real estate sustainable. The reduction pathways provide a guideline for this.”

 

There is also a possibility that there will be stricter regulations for real estate. Worldwide, real estate is responsible for approximately 30% of total carbon emissions and 40% of energy consumption. Mathieu: “Europe is now working on a Green Deal. It is not inconceivable that there will be a carbon emission ceiling for the real estate sector. This also makes a system possible where real estate owners are given tradable rights to emit a certain amount of carbon. Those who emit less than they have rights for are therefore able to sell rights. Conversely, polluters have to buy additional rights."

 

Regulations


With the help of the pathways, investors can identify in advance what regulations are likely to arrive. By taking these reduction pathways into account in our investments from now on, we can better manage the risks of future regulations and ultimately deliver more value to the pension fund members. Mathieu and Derk are convinced of this. Mathieu: “Just take the purchase of real estate. Whether or not the climate targets are met will increasingly determine the risk profile of property."

 

In short, Derk and Mathieu firmly believe in the positive effects of these carbon reduction pathways. The next important step is for other major investors and property owners to embrace the initiative. Derk: “The pathways are in place. We are now asking market parties to actively provide feedback on this. We hope that this will enable us to develop a certification that is embraced by the majority of the market. Clarity in the market is needed to make a real impact in making real estate more sustainable."

 

Volgende publicatie:
Shell raises climate ambitions

Shell raises climate ambitions

Published on: 16 April 2020

Investor cooperation in Climate Action 100+ pays off

Shell wants its product chains to be climate neutral by 2050. The oil and gas company announced this today. The plans build on Shell's agreements with Climate Action 100+ in 2018. On behalf of its pension fund clients, APG is part of this investor initiative.

 

Climate neutral means that, on a net basis, Shell does not want to emit greenhouse gases by 2050 or earlier. This applies to both Shell's own direct emissions, and the indirect emissions of Shell’s suppliers and customers.

 

As part of this ambition, Shell accelerates its efforts to reduce the net carbon footprint of its products, such as gasoline or kerosene. Whereas the company initially aimed for a 50% cut for 2050 and 20% for 2035, it now targets 65% and 30% respectively. As for customers, such as airlines and transport companies, Shell wants to focus more and more on companies that capture, store or compensate CO2 in their own chain , for example by expanding natural ecosystems. This will make the total chain climate neutral by 2050.

 

With these plans, Shell is taking further steps to contribute to the achievement of the Paris climate goals, says Corien Wortmann, chairwoman of the board of ABP pension fund. "We appreciate the fact that Shell regularly evaluates and now raises its ambitions. It is good to see what responsible investors can achieve if they join forces in an initiative such as Climate Action 100+."

 

After the earlier announcements in 2017 and 2018, Shell's example has been followed by other oil and gas companies. "We hope that this announcement will again have a domino effect. As a responsible investor and critical shareholder of Shell and other oil and gas companies, we will continue to monitor this closely."

 

With its new ambitions, Shell heeds the call in a recent report by the United Nations Intergovernmental Panel on Climate Change (IPCC) to limit the global temperature rise to 1.5 rather than 2 degrees Celsius.

Volgende publicatie:
Large-scale onshore wind power project in Sweden starts operations

Large-scale onshore wind power project in Sweden starts operations

Published on: 15 April 2020

APG, Asper Investment Management and Vasa Vind announce the start of operations of the 288MW, €300 million Åskälen project in Jamtland, Sweden. It is one of the largest onshore wind power projects in Europe and provides 1TWh of renewable energy per year, enough for over 175,000 Swedish homes.

 

This wind farm, which was announced in 2017, comprises of 80 Vestas V136 3.6MW turbines, with estimated carbon savings of 250,000 tonnes per annum. The project benefits from exceptionally strong local support, thanks to very active engagement by Vasa Vind, both at the municipality and county levels.

 

Vasa Vind, a portfolio company of funds managed by Asper, developed the project, managed its construction and will be in charge of its ongoing operational management. Asper, a London-based infrastructure manager focused on greenfield sustainable infrastructure platforms, also provides strategic asset management support to APG. Dutch pension funds ABP and PPF APG, whose assets are managed by APG, own 100% of the project and provided financing of c €300 million for its construction.

 

“Asper’s mission is to support entrepreneurial companies and investors at the forefront of the energy transition: we are delighted to have supported APG in boosting their renewable energy asset portfolio with this outstanding project. We are also proud of having helped Vasa Vind grow into a full-fledged player in the Swedish market, spanning across development, construction and operations management” said Allister Sykes, Director, Asper Investment Management.

 

Dirk Hovers, Senior Portfolio Manager Infrastructure at APG said: "As a long term responsible investor, we are always looking for investments that help to realize stable and sustainable returns for ABP and other pension fund clients we work for.  We are very happy with the start of operations of this project and our partnership with Vasa Vind and Asper. Scandinavian power is a strategic area for our infrastructure investments in renewable energy and we are looking forward to work on this and other successful projects with these partners."

Volgende publicatie:
"Sustainable business makes companies perform better"

‘Sustainable business makes companies perform better’

Published on: 6 April 2020

APG strives for maximum sustainability within its investment portfolio. "Its size, more than 500 billion in pension capital, enables us to push companies in the right direction," says responsible investment specialist Lucian Peppelenbos in an interview with Milieu Magazine.

 

APG manages the assets of a number of large Dutch pension funds and their participants, including bpfBOUW and ABP. The latter is the largest pension fund whose policy APG also implements. The money, altogether approximately €544 billion, is invested in such a way that the pensions of the 4.7 million participants can be paid now and later. The asset manager now invests approximately 70 billion euros of this money on the basis of the United Nations Sustainable Development Goals. These are global goals for sustainable development that focus on ending extreme poverty, inequality, injustice and climate change.


Peppelenbos: "We consciously invest in opportunities to achieve a cleaner world. Because that's what our clients, the pension funds and their participants want.” More and more investors are doing the same on the world stage. "Polluting companies will find it harder to tap into funds in the long run."

 

Read the entire interview here. (in Dutch)

Volgende publicatie:
APG aims to improve ‘carbon sink’ function of natural ecosystems

APG aims to improve ‘carbon sink’ function of natural ecosystems

Published on: 30 March 2020

A growing number of airlines, energy providers and other carbon-intensive companies pledge to reduce CO2 emissions to net-zero by 2050 or earlier. But how does that work? In addition to decarbonizing their businesses, companies increasingly invest in enhancing the ‘carbon sink’ function of natural ecosystems. While not new, the larger scale and professionalism of such Nature-based solutions (NbS) potentially makes them more attractive for investors like APG, says Jos Lemmens.

 

Nestlé, ThyssenKrupp, Volkswagen, Repsol and BP: these are just some examples of the many companies that have recently announced their ambition to reduce their net carbon emissions to zero by 2050 at the latest. Although details vary, these companies’ approaches have one thing in common; they rely partly on increasing ‘negative emissions’ by boosting the ability of natural ecosystems to sequester greenhouse gasses (GHGs).

 

Nature-based solutions (NbS) – as these initiatives are called – have been around for some time, says Jos Lemmens, Senior Portfolio Manager of the Natural Resources Fund at APG Asset Management, co-managing a portfolio of productive timberland and farmland assets. “Often these have been associated with carbon credits markets, but there are other ways in which contributions to sequester GHSs can be made. For instance by integrating nature-based solutions in the acquisition and maintenance of farmland and productive timberland. We know that natural ecosystems are excellent carbon sinks. They have the potential to sequester 30% of global CO2 emissions. In order to fully realize that potential, natural ecosystems need to be preserved, improved and expanded.”

 

APG, on behalf of its pension fund clients, invests in forests and agricultural land. When properly managed, these assets can sequester more carbon in the trees and soil, increasing the intrinsic value of the natural resource. In this way, the interests of stakeholders – investors, operators and local communities - can be aligned.

 

Tipping point

Prior to the corona crisis, Jos addressed a high-level conference co-organized by APG, where researchers, investors, companies and policymakers explored ways to make nature-based solutions (NbS) scalable and investable. “The market seems be at a tipping point”, says Jos. “Initiatives are still small-scale. But with large companies entering this market, existing developers can benefit from the financing, marketing and risk management capabilities that these new players bring along.”

 

One of the takeaways of the conference was that tackling climate change requires betting on many horses. Duncan van Bergen, VP Nature-based Solutions at Shell, for instance, explained that Shell is not only taking steps to reduce the carbon intensity of its products, but is now also investing $ 300 million a year in NbS. Many companies have announced plans to plant trees or (re)develop wetlands, in addition to their carbon reduction schemes. It is now generally accepted that keeping the rise of global temperatures well below 2 degrees requires large ‘negative emissions’.

 

Building an investment case

Scaling up NbS projects in terms of size and professionalism potentially makes them attractive for large investors like APG, says Jos. “It is not a matter of simply planting some trees but of using NbS to build up a sound investment case. In the long run, profitability can only be sustained if the land - our investment’s capital base - is well managed and shielded against degeneration. Investments in natural resources need to be sustainable to be commercially viable in the long term, and vice versa.”

The conference demonstrated the need for all involved – including companies, offerors of NbS, and investors – to pool their strengths to further develop this market. “When it comes to investing in natural resources, sustainability is not peripheral but the core of what we are doing. As a large investor, we have the opportunity to have an impact, even if only a little, with each of the many euros that we invest.”

Volgende publicatie:
Top position for APG in global sustainability ranking

Top position for APG in global sustainability ranking

Published on: 9 March 2020

APG is one of the global leaders in responsible investment. That is the assessment of ShareAction/AODP, which today announced its sustainability ranking. APG was awarded an A rating and ranked fourth in the world's 75 largest asset managers. ShareAction/AODP (Asset Owners Disclosure Project) is a social organization that assesses institutional investors on the approach they take to responsible investment. The focus is placed on climate change, human rights and biodiversity.

 

The A rating was this year’s highest assessment. In the previous ranking - the Global Climate Index 2017 - the world's 50 largest asset managers were assessed only on the extent to which they took account of the consequences and risks of global warming in their investment policies. At that time, APG was the only asset manager with the highest rating (AAA). With this year’s addition of human rights and biodiversity, no AAA or AA assessments were awarded. This is because no asset manager qualifies as a leader in all areas.

 

ShareAction/AODP's survey is in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), a global standard for how companies and investors can best report on climate change. ShareAction/AODP now also applies this standard to human rights and biodiversity. An A rating means that an asset manager is a leader when it comes to managing risks, opportunities and impacts in various (not all) areas of responsible investment.

 

“We're delighted with this recognition as a leader in responsible investment," says APG climate specialist Lucian Peppelenbos. APG regards the assessment as an incentive to continue to work with its clients on its responsible investment policy.” APG's largest client, ABP, recently announced its new sustainable and responsible investment policy. This focuses on three transitions: climate change and energy transition; resource scarcity and the approach to natural resources; and digitization. Respect for human rights and good corporate governance are important preconditions for this.

Volgende publicatie:
APG strengthens its position in Norwegian hydropower

APG strengthens its position in Norwegian hydropower

Published on: 18 February 2020

APG has increased its investment in the hydropower company Småkraft by €250 million for pension fund ABP. This investment follows two previous investments in the Norwegian company. This brings APG’s invested capital in this enterprise to a total of €550 million.

 

The extra capital enables Småkraft to expand its portfolio of hydropower plants in Norway and enables the construction of ten new, small-scale hydropower plants until 2022. Due to these new plants, the production of renewable energy will increase by 130 GWh a year. Ultimately, Småkraft will generate sustainable energy for 570,000 households.

 

Aquila Capital

 

A partner in this transaction is investment company Aquila Capital. It tracks Småkraft’s financial and operational policy on a daily basis and provides support where needed, says Viktor Filipan, portfolio manager of infrastructure at APG.

With 110 operational plants, the Norwegian company is the biggest operator of small hydropower plants in Europe, with a current production of nearly 1.2 TWh a year. And Småkraft is also a market leader on the technical level, Filipan concludes. “In terms of efficiency, these plants are top of the line.”

 

Right time

 

According to Filipan, the Norwegian hydropower producer also has an attractive risk/ reward profile. “We got into this at the right time and by now we have created a strong position in this market. With this platform, we distinguish ourselves from other big European investors.”

 

In addition, hydropower has several advantages as a form of sustainable energy generation: a long lifespan of dozens of years, low technical risks and predictability of energy production.  Filipan: “From the perspective of the infrastructure team, we are monitoring the possibilities of investing in large-scale hydropower plants. The storage capacity for this will be increasingly important in the future, to reduce the peak load of the electricity network. What we mean by that is that with the help of dams, you can save the water temporarily until the supply of wind and solar energy has gone down again.”

 

High demands

 

This investment is a good match with ABP’s new sustainable and responsible investment policy. One of the objectives in that policy is to expand investments in sustainable energy to €15 billion. Filipan: Aside from sustainable ambitions, it is important to us to set the bar high for all companies we invest in. This company meets our high demands.”

Volgende publicatie:
"We want to create a sustainable domino effect in aviation"

"We want to create a sustainable domino effect in aviation"

Published on: 10 February 2020

Airline companies must have decreased their net CO2 emissions to 0 by 2050. This strict requirement is set by a group of 122 big institutional investors in the sector, including APG, which invests over 3.4 billion Euros in the aviation industry by order to ABP, bpfBOUW, SPW and PPF APG. With a jointly managed capital of 6.4 trillion Euros, the investors expect they will be able to make a difference in realizing this goal. What is APG’s contribution going to be? We asked Lucian Peppelenbos, Team Manager GRIG and HansWerner Hitge, senior portfolio manager of Developed Markets Equities.

 

What are the main reasons for this appeal to the sector?

Lucian: “This agreement to stimulate the aviation sector to become sustainable together is part of a bigger collaboration: Climate Action 100 plus. This consists of over 400 investors worldwide, which challenge the biggest emitters of CO2 regarding climate. It also includes airline companies. We believe the momentum is there to bring awareness regarding aviation. The aviation sector in the United Kingdome recently set itself the goal to decrease CO2 emission down to 0 by 2050. That’s in line with our own objective, so that’s nothing new.”

 

Why should the sector worry about that? The aviation sector is not even included in the Paris climate agreement.

Lucian: “That doesn’t mean that the sector hasn’t been given any objectives. Branch organization IATA has expressed the ambition to cut the CO2 emission in half, as compared to 2005. A good step, but we think the bar can be set quite a bit higher.”

 

How is the sector going to achieve those objectives?

HansWerner: “There is still a lot of profit to be had with better efficiency: for example, by using the capacity of an airplane optimally. In addition, technological development can also make an important contribution. The technology to make organic fuel already exists. It’s just pretty expensive at this point.”

 

What about electric flying?

HansWerner: “I don’t see that happening anytime soon. On a small scale you see a few electric airplanes. But to get a 140-tonne machine off the ground with electrical power is a step too far. We have to be realistic about that: flying with zero emissions is in the distant future.”

 

Then how will it be possible to achieve 0 emissions by 2050?

Lucian: “We’re talking about the net-emissions here. A portion of the emissions will have to be compensated by, for example, planting new trees. The sector must strive to make this compensation portion as small as possible.”

 

How will you stimulate the sector to become more sustainable?

HansWerner: “In many cases, that is not even necessary. Take the British aviation sector, for example. The sector is realizing more and more that becoming more sustainable in many cases also means saving costs. More economical engines also have a considerable effect on the fuel consumption.” Lucian: “Of course, where necessary, we will also be having discussions with companies, independently, but also in collaboration with other investors, if the situation requires it.”

Lucian: “We’re hoping that showing good examples will create a domino effect. Last year, a tool was brought to the market for the aviation sector, which can be used to easily compare sustainable performances to each other, for example. What is striking is that there are big differences: that means there is still a lot of room for improvement.” 

Volgende publicatie:
Bar for sustainable investments at ABP is raised again

Bar for sustainable investments at ABP is raised again

Published on: 3 February 2020

ABP has presented its policy today in which the bar for sustainable and responsible investments is raised once again. The CO2 emissions in its equity portfolio, for example, have to be reduced by 40% and the investments in sustainable energy will be increasing significantly. What are the consequences of these ambitious goals for the companies and sectors in which ABP invests and what will change for the employees of APG Asset Management? We ask Peter Branner, CIO of APG Asset Management.

 

The sustainable goals ABP set itself until 2020 have all been achieved. What can you tell us about the results?
“Yes, ABP has amply met all goals set for 2020. In our role as executor we have contributed to this realization. ABP’s goal for listed shares was to reduce its CO2 footprint by 25 percent. The expected result is a reduction of 30 percent. The target for SDI’s was set at 58 billion Euro. A result of 64 billion was realized. The ambition for investments in sustainable energy was 5 billion Euro. The result turned out to be 6.4 billion Euro. We are proud to have contributed to these achievements.”

 

Was it a challenge for you to realize these goals?
“If you compare ABP’s goals with those of our competitors, ABP is in the forefront. The goals for 2020 were pretty ambitious for us.”

 

How was APG able to contribute to this success?
“ABP has given us clear goals to work on, which is very pleasant. Teamwork is an extremely important factor. These sustainable goals were embraced by the entire organization: from top to bottom. Our sustainability experts of the GRIG team (Global Responsible Investment and Governance) have played a major role in these accomplishments.”

 

The bar in the field of sustainability has been raised to yet another level in the new policy of ABP. What will APG do to also achieve those goals?
“We will mostly continue on the path we started earlier. However, the new goals are again quite a challenge for us. The policy also includes new themes on which we have to gain more knowledge. The theme of digitalization, for example, is fairly new. We truly believe that digitalization can contribute significantly in all sectors to more efficiency, cost reduction and sustainability.”

 

Can you give an example?
“Robotization is a trend in the construction industry. Increasingly more parts are made by robots. That ensures a faster construction process, less energy consumption and more efficient use of materials. It is important for this transition to a new way of working to be fair for the employees, for instance by paying attention to retraining of staff.”

 

What does this mean for the investment strategy of APG?
“We will focus more on the sustainable leaders. In many cases, these leaders are also leading the way in terms of digitalization. The digitalization agenda of individual companies will become increasingly important to us. If there’s no or hardly any planning in this field, it gives rise for us, as an investor, to doubt the future viability of a company.”

 

In addition to sustainability, a good return is also very important. Are there enough sustainable and profitable investment opportunities in the future?
“Time will tell. It is becoming more difficult for companies to meet our requirements. Some companies may possibly disappear from our portfolio. ABP has given APG the assignment to realize its sustainable ambitions without making any concessions regarding return and risk.”

 

How will you get these companies to follow your

lead?
“By using our influence as a shareholder to have companies implement improvements. In addition, the criteria of the inclusion policy will be tightened. We have recently concluded a number of “signature deals” we also want to confront other companies with as an inspiring example in the field of sustainability. Alpha Trains is such company. That ensures a major contribution to the reduction of CO2 emissions of the European train transport. And, obviously, we also just look at the hard figures.”

 

What is the effect of this policy on employees of APG?
“Digital skills are becoming increasingly important. Portfolio managers must be able to translate the trend of digitalization into interesting investment opportunities. We will select new employees more on that type of skills and we train existing staff in this field. In terms of investments, we will also make a huge switch towards digitalization. Our division for data analysis, Entis, helps us identify SDGs (Sustainable Development Goals). This is also something we hope to inspire other companies with.”

Volgende publicatie:
"Also dare to be an activist as an investor when it comes to sustainability"

'Also dare to be an activist as an investor when it comes to sustainability'

Published on: 24 January 2020

Include climate risks and climate performances in your investment portfolio. That’s the urgent appeal Thom Wetzer makes to APG and the present pension fund directors during the annual APG event “With a view to tomorrow”.

The professor Law and Finance at the Oxford University presented a narrative with two chapters last Thursday in Oegstgeest: the optimistic part revolved around apparent small actions that may lead to large movements. An until then unknown student Gretha Thunberg who decides not to go to school one Friday in protest against the climate policy and who gradually succeeds in mobilizing millions of people. According to Wetzer, it is also possible to put such snowball effect in motion when it comes to investments. The more investors invest in, for example, solar panels, the cheaper they will become and the more often these will be purchased.

 

Disastrous

However, Wetzer started his presentation with the pessimistic chapter. If we continue on an equal footing, the average temperature on earth will rise with 4.1 to 4.8 degrees. That would be disastrous, he concluded. “If the temperature rises 3 degrees, millions would be forced to migrate to other areas. The bad news is that climate change also has a lot to do with snowball effects, yet in a negative sense. “Take the melting glaciers as an example. Less sunlight is reflected due to the disappearance of glacial ice. That leads to the earth’s surface heating up. And that, in turn, leads to glaciers melting faster.”

The physical consequences of that climate change already have a major effect on the production and trade. The forest fires in Australia is a striking example. The Panama Canal is a different example. Due to the increasing drought in that area, vessels cannot pass the canal or only with a less heavy load. That has an enormous negative impact on the normal course of trade and, therefore, on investments.

 

Value portfolio

Investors are well advised to already include those types of risks in their portfolio, says Wetzer. In addition to these physical risks, there are plenty of other climate-related risks that may impose major effects on the value of a portfolio. “The sharply declining demand for coal has a huge effect on the value of companies. In the past 10 years, coal-fired plants in the United States have fallen in value with 99 percent. According to experts, oil companies have to anticipate a future oil price of 20 to 35 USD per barrel. That while they need a barrel price of 60 to 80 USD in order to be profitable.”

In contrast to these major climate risks, Wetzer foresees equally large climate opportunities. Such as Tesla, a company dominating the market of electric vehicles. And Volkswagen that, in response, invests billions in order to grow rapidly in the field of electric transport.

 

Climate opportunities

However, both climate risks and climate opportunities are often not included when it comes to choosing certain investments, concludes the professor. Why is that? “Many investors don’t look further ahead than 10 to 15 years. They therefore overlook many climate risks as those will occur later on. In addition, we only had limited information about climate risks and the possible financial consequences.”

Fortunately, that provision of information is improving rapidly, Wetzer notices. A group of large companies, including APG, has developed the so-called Taskforce of Climate Related Financial Disclosures. A standard used to assign a certain value to risks. Banks and regulatory authorities are also in need of more information on climate risks. In addition, advancing insights also ensure more clarity on possibly promising technologies. 

Investors no longer have any reason to ignore climate risks and climate opportunities, says Wetzer. He is happy to provide investors with some tips. Have a good look at your current portfolio. Is it still balanced? Are the climate risks not weighing too heavily?

 

APG

According to Wetzer, APG is one of the frontrunners in the field of sustainable investing. “A strong asset of APG, in my opinion, is the scenario analysis. That scenario also takes into account the consequences of possible future scenarios. Another strong feature of APG is the actual assessment it makes for companies in terms of their sustainable activities. “A company such as Shell is doing well on that part. By entering into a dialog as an investor regarding the non-sustainable activities, the oil giant is now making important steps in the field of sustainability.”

Be sure to engage in a conversation as an investor, but do not shy away from the role of activist if that doesn’t work, is Wetzer’s advice. “Threatening legal action or the sale of shares also is a powerful tool to set companies in motion.”

Volgende publicatie:
Equity consortium agrees to acquire stakes in New York’s Astoria Energy facilities

Equity consortium agrees to acquire stakes in New York’s Astoria Energy facilities

Published on: 17 January 2020

New York City, January 17, 2020 A consortium of equity investors including APG, MEAG (Munich Re’s asset manager acting for investors from within Munich Re Group), and Clal Insurance Company, alongside other US institutional investors have agreed to acquire 100% of Astoria Energy I and a 55% interest in Astoria Energy II. Located in Queens, New York, the facilities total 1.2 GW of combined-cycle generation. The plants are expected to provide reliable and required power as New York transforms its energy sector in the decades to come.

 

The assets are two of the most efficient natural gas plants in New York City. Astoria I provides merchant energy and capacity into the New York power market, while Astoria Energy II operates under a long-term tolling agreement with the New York Power Authority through mid-2031. The transaction is subject to regulatory approval and is expected to close in the first half of 2020.

 

Steven Hason, Head of Americas Real Estate & Infrastructure at APG said, "As a pension investor, we are continuously looking for attractive infrastructure investments that help us realize stable and long-term returns for our pension clients. This transaction represents an opportunity to invest in facilities that provide reliable baseload electricity to New York City and will provide system stability through New York’s energy transition. We look forward to working with our partners who share our long-term investment goals with regard to this critical infrastructure asset."

 

Holger Kerzel, Member of the Board of Management at MEAG, stated, "We are keen to invest in the United States, given the large US share of Munich Re’s insurance portfolio. Electricity supply for New York City is an attractive investment opportunity for Munich Re, given the moderate risks and stable and sustainable returns. The high level of long-term income stability will cover the liabilities in the insurance business of our clients. We are pleased to have teamed up with professional partners in this investment project to form a successful long-term relationship."

Yossi Dory, Clal’s Chief Investment Officer, said, "We are proud to invest alongside reputable investors such as APG and MEAG in long-term, high-quality assets with a proven track record and excellent performance. The Astoria projects, which are the backbone of the New York City electric power system, will create long-term, sustainable returns for our pension, provident, and insurance members."

 

Holland & Knight and Sidley Austin LLP acted as legal counsel to the equity consortium.

Volgende publicatie:
APG contributes to low carbon European train transport

APG contributes to low carbon European train transport

Published on: 20 December 2019

APG, on behalf of its pension fund clients, has acquired an indirect 41.1% interest in Alpha Trains, the leading passenger train and locomotive leasing company in Continental Europe. Alpha Trains provides rolling stock to train and locomotive operators under leases, which provides train operators with the flexibility to respond dynamically and commercially to opportunities presented in the rail transport market, independent of long-term investment considerations. The majority of the fleet is electric, making a significant contribution to the decarbonisation of Europe’s transport sector.

 

Peter Branner, CIO of APG, about this investement: “As a long-term responsible pension investor, we are continuously looking for attractive investments that help us realise stable returns for ABP and the other pension fund clients we work for, while at the same time contributing to a sustainable world. The investment in Alpha Trains Group perfectly fits our investment strategy: Alpha Trains’ fleet of mostly electric trains and locomotives promotes sustainable, low carbon mass transport within Europe while also offering access to a long-term business model with strong growth and resilient cash flows.”

 

About Alpha Trains

The Alpha Trains portfolio consists of more than 800 passenger trains and locomotives on lease across Continental Europe (including Germany, France, Italy, Spain and Benelux) where it is the market leader amongst the privately-owned rolling stock lessors.
Alpha Trains participates in the annual GRESB survey – a leading Environmental, Social and Governance (ESG) benchmark for infrastructure investments across the world – and has been ranked first among their peers in the global diversified infrastructure funds and rolling stock asset class categories, respectively.

 

See press release

Volgende publicatie:
APG expands hotel investments with City ID and Harrington Hall

APG expands hotel investments with City ID and Harrington Hall

Published on: 16 December 2019

APG has expanded its hotel portfolio with the investment in the Dutch hotel chain City ID and the Harrington Hall hotel in London's South Kensington. City ID is one of the leading players in the field of aparthotels (merging apartments and hotels). Aparthotels have all the advantages of a hotel (cleaning - service - meal service) but consist of apartments instead of rooms.

 

The locations of City ID distinguish themselves in different parts from the more traditional hotels. They offer an ideal solution for guests looking for longer-term accommodation, says Robert-Jan Foortse, head of European Property Investments at APG. “In our opinion, there is a considerable market opportunity to roll out this concept to the major European cities. We look forward to getting started with the City ID team. ”

Amsterdam

City ID currently has three hotels in Amsterdam. For the past two years, City ID has opened the Twenty Eight hotels on Stadionplein and Boat & Co in Houthaven. Unique interiors, attention to design, a wide range of services; with those characteristics, the hotel scores one of the highest customer ratings in the city.

Alexander Goad, CEO of City ID, sees APG as an important partner to realize that growth. “APG is a leading strategic investor in Europe. The company has a great track record when it comes to putting innovative hotel chains on the international map. ”

Harrington Hall

In addition to the investment in City ID, APG has taken over London's Harrington Hall Hotel in a joint venture with real estate investor London Central Portfolio (LCP). It is  a redevelopment into an all-suite hotel in the upper middle class. The hotel focuses on budget-conscious business guests and tourists.

With the shares in City ID and Harrington Hall, APG is steadily expanding its investments in the hotel sector. Other interests of APG in the European hotel sector are Archer Hotels, CitizenM and The Student Hotel. According to Robert Jan, these are investments with an attractive long-term return compared to the risk involved. He anticipates that the sector will receive a further boost in the coming years due to the expected growth in tourism and business travel.

Volgende publicatie:
APG paves the way on responsible investment in fixed income

APG paves the way on responsible investment in fixed income

Published on: 16 December 2019

Historically, sustainable and responsible investment in fixed income has been much less developed than in equity. But in recent years investors have been making headway in this respect. APG - on behalf of its pension fund clients - paves the way: we aim to improve issuers’ ESG performance and to further develop the market.

Equities still receive the lion’s share of attention from the responsible and sustainable investment community. Compared to other assets, equity includes a large body of ESG (Environmental, Social and Governance) research, numerous benchmarks and indices, and clear connections to corporate engagement. But change is under way, says Tim Slüttter, Head of European Credits at APG Asset Management. “Investors are discovering that fixed income is well suited to both benefit from and provide finance for ESG-related efforts. APG wants to be at the forefront of this development and pave the way for further market development.” 

 

Making headway

In the past few years, APG has made headway in integrating ESG into the investment process. Since fixed income accounts for about one third of assets under management, strengthening ESG performance in this asset class contributes greatly to the responsible investment ambitions of our pension fund clients. It also reduces ESG-related risks in the portfolios and improves ESG in the broader fixed income market. 

APG’s approach towards ESG in fixed income is not that different from investing in equity. “When making investment decisions, we always consider return, risk, costs and ESG, regardless of asset class,” explains Herman Slooijer, Managing Director Fixed Income. “But it is precisely the consistent integration of ESG across asset classes – what we call inclusion – that is particular to our approach.”

 

Bondholder engagement

Still, responsible and sustainable investing in fixed income differs in some important respects from equity investment. “Bondholders obviously cannot exercise voting rights,” says Slütter. “So you’d think that fixed income investors can exert less influence over companies. However, we see that companies that are receptive to the views of their shareholders also listen carefully to their bond holders. This is especially true for companies that regularly need money for growth or refinancing.” 

 

Under the radar

Another difference is that although the universe of possible investments in equity and fixed income is similar, it is not exactly the same. “As bondholders we are also in dialogue with smaller non-listed companies”, says Slütter. These are companies that remain under the radar in the equity space. “Many such companies are not used to having to disclose financial data - let alone ESG information - on a regular basis to a larger group of investors. We have reached out to over several hundred such companies. With most of these we now have a productive exchange of information on issues such as environmental risks, supply chain oversight and workers safety.“

 

Driving the green bond market

A fairly recent innovation in the fixed income space are sustainable, green and social bonds. At the end of 2018, APG had € 6.9 billion invested in bonds of which the proceeds are earmarked for specific environmental or social projects. This makes us one of the largest investors in the worldwide green bond market. “Over the years, we have established a productive dialogue with issuers and potential issuers, as well as banking syndicates, regulators and certifiers,” says Slooijer. “We use our network, experience and knowledge to further develop the green bond market.”

Clearly communicating or expectations can help alleviate issuers concerns about the market’s response to a potential green bond program and thereby serve as a market stimulus. Therefore, APG earlier this year published its Guidelines for Green, Social and Sustainable Bonds.

 

Global approach

“In the US, we also see rising awareness from both companies and investors, albeit from a lower base, with companies increasingly integrating ESG in their risk frameworks and strategies,” says Ann-Marie Griffith, Managing Director Credits US. “We have been building our presence and are now reaping the fruits of our efforts.” In the US market, APG has been particularly active in fostering (corporate) green bond issuance, which still lags far behind the European market. This involvement resulted, among other things, in the recent issuance of the first-ever US bond related to the UN Sustainable Development Goals.

 

The road ahead

Going forward, Herman Slooijer identifies three ambitions for APG when it comes to ESG in fixed income. “First, to continue our work on improving disclosure and performance of issuers. Second, to further develop the green bond market, and make sure we better understand and measure real world impact . And third, to create an approach for ESG integration in government bonds. ESG-awareness has greatly increased over the past years. The next step is to capitalize on that.” 

Volgende publicatie:
Global investors harmonize carbon accounting methods

Global investors harmonize carbon accounting methods

Published on: 12 December 2019

A growing number of financial institutions are making the CO2-impact of their investments and loans visible. They are thus taking an important step towards aligning their portfolios with the Paris climate goals.

 

Worldwide, 57 financials have now adopted the PCAF carbon accounting methodology, of which APG is one of the founding members.  

 

PCAF’s latest report, presented at the Madrid Climate Summit, shows the progress that has been made with its carbon accounting methodology. At present, 57 financials with total assets of 3.5 trillion USD in assets have adopted the Partnership for Carbon Accounting Financials’ guidelines and methods. It is strong indication that the initiative – which started out in 2015 as a cooperation of 12 Dutch financial institutions – has evolved into a worldwide collaboration. 

 

No exact science

In his contribution to the report, APG’s chair Gerard van Olphen underlines the importance of harmonized CO2 disclosure guidelines and methods. “Laudable carbon reduction intentions are meaningless without solid, trustworthy carbon accounting. With the consequences of climate change becoming increasingly visible around us, responsible investing intentions in cadence with robust carbon accounting is needed more than ever.” 

 

In 2015, APG’s pension fund clients adopted the target to reduce the carbon footprint of the listed equity portfolio with 25% in 2020 (compared to 2015). “Currently, we have achieved a reduction of 29%, so well on track to meet our clients’ target”, says Joost Slabbekoorn, responsible investment specialist at APG. “But measuring emissions is not an exact science. We want it to be more than a paper exercise, and therefore the assumptions underlying the calculation must be transparent and verifiable. This is essential to establish trust and, ultimately, to make a meaningful contribution to reduced CO2- emissions.” 

 

Commitment of the Dutch financial sector

APG believes that the financial sector can play a vital role in the transition to a low-carbon economy and the realization of the Paris climate goals. To underline this, Van Olphen recently chaired the Financing Task Force which focused on the contribution of the financial sector to the Dutch Climate Agreement. The commitment of the financial sector requires parties, among other things, to disclose the carbon footprint of relevant loans and investments (2020) and to announce plans of action and reduction targets for 2030 (no later than 2022).  

 

The commitment of the Dutch financial sector does not prescribe a specific method for reporting, explains Slabbekoorn. “PCAF brings the experience with measuring carbon footprints of different parties together. In this way we learn from each other and will move faster in our aim to contribute to the Paris climate goals. Also, harmonization in terms of reporting is needed for the Dutch financial sector to be able to collectively report on its contribution to reduced emissions.”  

 

The road ahead

APG’s largest client, pension fund ABP, is currently in the process of defining a new responsible investment policy for the period 2020-25. “A carbon footprint target is likely to feature again as part of the new policy”, says Slabbekoorn. “Also, as part of the Dutch Climate Agreement, we will also devise ways to measure the carbon footprint of other asset classes beyond listed equity.” 

Volgende publicatie:
APG buys majority stake in German North Sea mega wind farm

APG buys majority stake in German North Sea mega wind farm

Published on: 10 December 2019

APG today announced the acquisition of a 64% stake in Merkur Offshore, a large wind farm in the German North Sea. The acquisition is made on behalf of its pension fund client ABP. The recently completed wind farm, with a capacity of 396 MW, is fully operational and provides enough renewable energy for the equivalent of 500,000 Dutch households. The project will save c.18 million tonnes of CO2 equivalent over its project life.

 

The remaining 36% of the wind farm will be acquired in partnership with funds managed by InfraRed Capital Partners Limited, a leading international investment manager focused on infrastructure and real estate. Financial details of the investment are not disclosed.

The Merkur Offshore wind farm consists of 66 General Electric (“GE”) Haliade-150 offshore wind turbines, with a capacity of 6MW each, spanning an area of ​​approximately 47 km². The wind farm is located 45 kilometers off the north German coast, making it invisible from land.

 

Patrick Kanters, Managing Director Global Real Assets at APG: “As a pension investor, we are continuously looking for attractive, responsible infrastructure investments worldwide that help us realize stable and long-term returns for ABP and other pension fund clients we work for. Our investment in this large wind farm Merkur Offshore, on behalf of ABP, fits the core of our strategy. Not only do we expect solid returns, it also marks a major step in the growth of our renewable infrastructure portfolio, providing sustainable energy to hundred thousands of households. We look forward working together alongside InfraRed in the years to come.”

 

This acquisition represents APG’s second investment in the offshore wind sector, following its previous investment in Walney 1 in the UK, and builds on its already substantial renewable energy portfolio across Europe, which now totals in excess of 2GW.

APG makes this investment on behalf of ABP and ppf APG.

 

Read the ABP (NL) press release here. The APG (EN) press release can be found here.

 

Watch a short film about the construction of Merkur Offshore below.

Volgende publicatie:
APG to acquire share in car park owner and operator

APG to acquire share in car park owner and operator

Published on: 23 October 2019

APG / ABP today announces that it is taking a 39% interest in Interparking, one of the largest providers of parking solutions in Europe.

 

Why does APG invest in Interparking?

“This investment is an excellent opportunity to gain access to a high-quality European portfolio of parking locations with an attractive long-term return for ABP and their participants. Moreover, we see potential for further growth in the future.”

“The investment fits in a larger development that we see in the field of "Smart Cities & Smart Mobility". Parking solution providers will play an important role in the "Smart City ecosystem". A Smart City is an ecosystem in the field of infrastructure, services and digital solutions that increase the quality of life, economic growth and sustainability.”

 

How can this investment be reconciled with our sustainable and responsible investment policy?

“That link can be easily made. Interparking contributes to fewer traffic jams in cities and fewer parked and driving cars on the street. This also leads to fewer emissions in cities. Interparking also undertakes various activities to promote sustainability. The company works in a CO2-neutral manner in all countries where it is active, including through the placement of solar panels on its locations. In addition, Interparking installs charging stations to meet the growing demand for charging electric cars.”

 

Parking rates in garages can sometimes be very high. How does Interparking handle this?

“This is of course an important theme for consumers. Part of Interparking's strategy is that they do not strive for price maximization. The parking fees that are applied are often lower than those of direct competitors. The reason for this is that Interparking believes in a long-term relationship with consumers and municipalities. So that the company remains relevant in the future. Interparking also applies lower rates for environmentally friendly cars and there are discounts for students and parking in the evenings and weekends.”

 

Can we expect more from this type of infrastructure investment in the coming years?

“Our pension fund clients want us to invest more in infrastructure. Thus, we are constantly looking for other possible attractive investments in this investment category. As with our other investments, we always look at the right mix of return, risk, costs and esg factors. We expect to add various investments in infrastructure to our portfolio in the coming years.”

 

Read here ABP press release

Read here APG press release

Volgende publicatie:
APG drives sustainable development goals with collective investments

APG drives sustainable development goals with collective investments

Published on: 17 October 2019

APG wants to ensure, like 29 other large international companies and investors, that hundreds of billions of euros can be invested in the sustainable development goals of the United Nations.

 

The cooperation program is first set out to continue for two years. The collective will collaborate with the United Nations during that time to provide recommendations that should promote those long-term investments in SDGs.
The 17 SDGs together form a blueprint for a better and more sustainable world, such as clean energy, climate actions and the fight against poverty. Much more money is needed to finance these goals than can be contributed by governments; meaning companies and investors have to contribute as well. The collective has set the objective of significantly increasing the investments of the private sector in sustainable development goals.

Large companies
The group of investors present themselves as Global Investors for Sustainable Developments (GISD) and further consists of large companies active in the world of finance, such as GPIF, CDPQ, PIMCO, CalPERS and also Bank of America, Citigroup, ICBC, Infosys, Investec, Santander and UBS.
António Guterres, Secretary-General of the United Nations, emphasizes the importance of the GISD in a statement. The growing gap between the rich and the poor, disasters, conflicts, global warming; Guterres is happy to notice CEOs feeling a strong sense of urgency to address these subjects quickly. “This cooperation transcends national borders and sectoral boundaries. Collaboration even takes place at competitive level, and with good reason”, says the Secretary-General. Investing in the SDGs, according to him, is very sensible, both ethically and commercially.

 

Duty
Ronald Wuijster, board member of APG, considers it a necessity for the financial sector to collaborate in order to create solutions for a sustainable future. “APG manages the pensions of millions of hard-working people in the Netherlands. It is our duty to see them enjoying their pension in a stable, eco-friendly and equitable world.”

The pension provider, together with PGGM, recently announced the establishment of the SDI Asset Owner Platform. The goal of this initiative is to bring together like-minded long-term investors in order for them to be able to invest in the SDGs based on the same definition, classification (taxonomy) and data.
This initiative also fits in seamlessly with the objectives of the clients of our pension fund: ABP (goal: 58 billion euro) and bpfBOUW (goal: 12 billion euro) want to have considerably more investments in the sustainable development goals (SDIs).

Volgende publicatie:
Pension fund ABP again the most sustainable fund in the Netherlands

Pension fund ABP again the most sustainable fund in the Netherlands

Published on: 10 October 2019

APG's largest client ABP leads the ranking of sustainable Dutch pension funds. Just like last year. The Association of Investors for Sustainable Development (Vereniging van Beleggers voor Duurzame Ontwikkeling, VBDO) announced this today, on Sustainability Day, at the presentation of the VBDO Benchmark for Sustainable Investing.

 

The association presented the list at the annual Congress of the Dutch Pension Federation. ABP scored 4.6 out of 5 points. APG's other asset management clients also achieved good results. BpbBOUW went from a third place last year to a nice second place this year. SPW kept its fifth place.

 

Every year, VBDO examines the performance of the responsible investment policy of Dutch pension funds. The benchmark assesses the 50 largest pension funds in the Netherlands, together accounting for 92% of the assets under management with a total value of more than € 1,230 billion.

 

Each fund received a list with a total of 50 questions, divided into four categories: governance, policy, implementation and accountability. VBDO indicated that they had raised the bar somewhat this year, because they see more and more development in the field of responsible investing.

 

Interested? Download the full VBDO report here.

Volgende publicatie:
Cooperation with investors in CO2 reduction is bearing fruit

Cooperation with investors in CO2 reduction is bearing fruit

Published on: 3 October 2019

Together with other major investors, APG achieves results when it comes to reducing the CO2 emissions of the companies in which it invests. Companies are emerging in almost all sectors that play a leading role in the transition to a low-carbon economy. At the same time, the sustainability strategy of the vast majority of companies is not yet in line with the Paris climate goals.

 

This is evident from the first progress report from Climate Action 100+, a group of more than 370 large investors to which APG is also affiliated on behalf of its pension fund clients. This initiative, founded in 2017, aims to jointly put pressure on 161 companies that are responsible for the majority of the  CO2 emissions worldwide. The participating investors together have $ 32 trillion under management, about a third of all the money invested globally by institutional investors.

 

Encouraging results

Climate Action 100+ requires companies to provide insight into the climate risks for the company and to take measures to reduce greenhouse gas emissions. Companies must formulate long-term ambitions in line with the Paris agreements (limiting global warming to well below 1.5 ° C) and translate them into concrete, measurable objectives. Some examples of results achieved by Climate Action 100+:

  • Shell has formulated long-term goals for reducing CO2 emissions, and will link the remuneration of top management to concrete goals in the short and medium term.
  • Heidelberg-Cement and Maersk, the largest shipping company in the world, have announced that they will be fully climate neutral in 2050.
  • Rio Tinto mining group has ceased its activities in coal.
  • Volkswagen has formulated long-term climate ambitions and will have 70 electric models on the market in 2028.

Within Climate Action 100+, APG is part of the so-called core group of investors who mainly focus on the major oil and gas companies. In addition, APG coordinates the dialogue with companies in the food sector and we are in charge of discussions with Unilever and Nestlé. The latter company recently announced that it wants to be completely CO2 neutral by 2050.

 

Still insufficient

According to Climate Action 100+, the first results are "encouraging." At the same time, the report states that only 9% of the companies involved are currently doing enough to align CO2 emissions with the Paris climate targets. “Although there are leaders in every sector who adjust their strategy and have the ambition to work climate-neutral, many still have to follow. The task ahead of us remains immense," according to the report.

"The progress we have made with a number of leading companies through Climate Action 100+ shows that we as institutional investors make a difference," says climate specialist Lucian Peppelenbos. “But more companies will have to take steps. Where necessary, we will continue to increase the pressure together with other investors."

Volgende publicatie:
Out of the trenches

Out of the trenches

Published on: 23 September 2019

"Shouldn't we, after all, have a fundamental discussion about whether the risk-free interest rate is really the only measure that can achieve balanced risk sharing between the elderly and young people, in a collective pension contract?". This is what Peter Gortzak, head of APG policy, questions this week in his column for ESB. His contribution focuses on the interest rate term structure (risk-free rate) that pension funds are required to use to calculate their funding ratios. Now that the interest rate is extremely low, the financial position of funds is under great pressure. "These are special times," said Gortzak. "Shouldn't we come out of the ever-deepening trenches?" 

Read the full text here: (Dutch only)

 


 

Schuif de dogma’s terzijde

Peter Gortzak Hoofd beleid bij APG

Het zijn bijzondere tijden. De inkt van het pensioenakkoord was nog niet droog of het gesteggel tussen akkoord-sluitende partijen ving aan over die uitwerking. Dat was voorzien.

Men heeft daarom ook een hele kerstboom opgetuigd om de uitwerking ter hand te nemen met als piek het zogenaamde escalatieniveau waar knopen zullen moeten worden doorgehakt waar werkgroepen, commissies, voorbereidingscommissie en de stuurgroep niet uitkomen.

Als je je oor te luisteren legt spreken collega’s van een lege verzameling: alle voorwaarden willen realiseren in één contract is onmogelijk.

Andere collega’s spreken van uitroken: een vooropgezet doel om vanuit het huidig ftk, al dan niet via een alternatief collectief contract, uit te komen op een variant van de verbeterde premieregeling.

Een harde noot die gekraakt moet worden is wat nou eigenlijk belangrijker is; de doelstellingen of de piketpalen in het akkoord. Is er ruimte om de gestelde doelen voor het SER-contract op een net iets andere manier te realiseren?

Uiteindelijk zal de discussie niet worden beslecht in de stuurgroep maar op het escalatieniveau: minister en voorzitters van sociale partners.

Wat niet voorzien was, waren de recente ontwikkelingen. Die zijn zo bijzonder dat je in enkele weken van je geloof kunt vallen en dat zelfs de beste jongens en meisjes van hun klas in verlegenheid worden gebracht. Ik heb het natuurlijk over de rente.

De rente is idioter gedaald dan tot voor kort voor mogelijk werd gehouden. De vraag is inmiddels gerechtvaardigd of het uitgangspunt van de rentetermijnstructuur, nog steeds kan worden gehuldigd.  Zelfs de meest verstokte aanhangers van een risicovrije rente, in een overigens door iedereen erkend niet meer bestaand model van zekerheid, zullen zich toch achter de oren moeten krabben of de consequenties ook door hen zo zijn bedoeld.

Inmiddels, mede met de door de parametercommissie vastgestelde nieuwe grenzen, én de fors verder gedaald rente, zitten vrijwel alle fondsen in een schuitje waar niemand ze in verwacht had. Is het niet vanwege een kortingsdreiging dan is het wel de dramatisch gedaald premiedekkingsgraad die noopt tot rigoureuze maatregelen.

Pleit ik dan voor nooit korten? U kent mij beter. Maar déze situatie vergt nadere overweging.  

Dat de rente langer laag blijft geloof ik direct. Maar dat we met een negatief rendement moeten rekenen snap ik niet. Als je het pensioen in Nederland voor een belangrijk deel stoelt op kapitaaldekking dan ga je toch uit van een bepaald te halen rendement, hoe bescheiden ook, en niet van 40 jaar negatief. Om dan tegen een deelnemer te zeggen, u legt 100 euro in om over 40 jaar 98 euro te ontvangen, terwijl er, zeker gemiddeld, wel degelijk rendement kan worden bijgeschreven, is gek.

De vraag is dan gerechtvaardigd of wij wel door moeten gaan met een (deels) op kapitaaldekking gebaseerd stelsel. Ik pleit niet voor opheffing daarvan. Integendeel. De kracht van ons stelsel zit m juist in de combinatie van een op omslagbasis én kapitaaldekking gebaseerd pensioen.

Maar ook als je voor een minder rigoureuze oplossing kiest: de route naar de verbeterde premieregeling lost niet alle zaken op. Ook in dat systeem heb je de rente nodig om te bepalen tegen welke prijs een opgebouwd kapitaal wordt omgezet in een uitkering.

Zelf zou ik het  jammer vinden als we het door de SER voorgestelde contract met de uitgebreidere risicodeling overboord gooien, alleen omdat de marktrente nu zo idioot laag is. Bovendien zal het schragen van de verplichtstelling, een wens die alle partijen zeggen te hebben, zonder dit contract niet eenvoudig blijken te zijn. Zeker niet als transparantie en duidelijkheid voor de deelnemer tot de doelstellingen horen.

Moeten we eigenlijk toch niet gewoon een fundamentele discussie hebben over de vraag of de risicovrije rente werkelijk de enige maatstaf is waarmee in een collectief pensioencontract een evenwichtige risicodeling tussen ouderen en jongeren kan worden bereikt.

Zouden we niet eens uit de steeds dieper wordende loopgraven moeten komen, de dogma’s terzijde moeten schuiven, erkennen dat de bijzondere situatie vergt en mogelijk maakt zonder gezichtsverlies van wie dan ook serieus te overleggen of de huidige systematiek niet voor een andere zou moeten worden ingeruild?

Volgende publicatie:
'Global SDI Asset Owner Platform is leading the way on sustainable investing’

'Global SDI Asset Owner Platform is leading the way on sustainable investing’

Published on: 11 September 2019

What is the SDI Asset Owner Platform?
“The SDI Asset Owner Platform allows asset owners to connect around a shared objective of understanding to what extent their portfolio investments contribute to the UN Sustainable Development Goals (SDGs). These goals, set by the United Nations in 2015, aim for a better, livable world. For example by building more sustainable cities and generating more clean energy. The SDI Asset Owner Platform provides a common definition, taxonomy and data source for investments into the SDGs, offering insights that can be used by investors to analyze, select and engage with their worldwide investments.”

 

Why is this important?
“An increasing number of global asset owners and institutional investors aim to understand the contribution they make, through their investments, to the SDGs. Now, APG and its likeminded partner PGGM have joined forces with the goal of creating a critical mass of asset owners who together define what it means to be investing in the SDGs. These insights can be integrated into the investment process, and also allow investors to shift more capital to SDIs. Speaking a common language improves engagement with companies and eventually should drive more meaningful disclosures by companies, too. As asset owners report on the same basis on their investments into the SDGs, their disclosures become comparable and provide stakeholders with more transparency.”

 

What powers this platform?
“In 2018 APG took over the data analytics team from Deloitte and established the company Entis. The team had successfully applied its technical infrastructure and smart algorithms to identify investments that contribute to solutions to the important global challenges. In 2018, APG then asked Entis to apply this specifically to the UN Sustainable Development Goals, in line with the SDI taxonomy published jointly with PGGM in 2017. The taxonomy is supported and used by several other investors like CBUS. In less than a year, by the end of 2018, the Entis team analyzed an investment universe of some 10,000 global listed companies and identified the SDIs among them. Using artificial intelligence and big data allows investors to assess very large numbers of investments on their contribution to the SDGs and integrate this information into their investment process.

 

How does the SDI Asset Owner Platform relate to the responsible investment goals of APG and its clients?
“Our largest client ABP, the € 430 billion Dutch civil servants pension fund, in 2015 set the target to double its investments in the SDGs to € 58 billion by 2020. Another client, Dutch builders pension fund bpfBOUW, also set a target of € 12 billion. It is therefore crucial that we can identify Sustainable Development Investments. They always have to meet our clients’ financial risk and return requirements from the outset ”

 

How does the SDI classification assess an investments contribution to the SDGs?
“The SDI classification measures how much of the business relates to products and services that contribute to SDGs. It is based on relevant financial or operational metrics, for example revenue and capital spending, as well as contextual information. Looking ahead, we have the ambition to develop metrics that give insight not only into how much we invest into companies that contribute to the SDGs and to which ones, but also into the outcomes those companoes have achieved. An Example is the number of people provided with access to financial services.” 

 

How does the SDI Asset Owner Platform link with other external reference frameworks?
“The SDI taxonomy considers established standards an important source and reference and will make use of them where  suitable. Importantly, the SDI Asset Owner Platform is global in nature and hence takes a global view across all SDGs.”

 

What is to happen next?
“With APG and PGGM joining forces to establish the SDI Asset Owner Platform, the SDI framework is gaining traction and leading the way as to how institutional investors can contribute to the  UN Sustainable Development Goals. Together we will offer this pioneering approach to likeminded institutional investors across the globe, and welcome them to join the SDI Asset Owner Platform.” We feel strongly supported by other asset owners, such as for example  Australia’s leading building and construction pension fund who has adopted the SDI framework and the Universities Superannuation Scheme from the UK who will work with the SDI AOP in assessing its exposure to and support for the SDGs”.

Read the press release here.

Volgende publicatie:
“You can work for millionaires or you can work for millions of people”

“You can work for millionaires or you can work for millions of people”

Published on: 6 September 2019

CIO Peter Branner was interviewed recently by IPE and talked about future growth, responsible investing and his vision on long-term.

 

In the interview, Peter talked about where APG can find future growth for pension fund clients and its beneficiaries: “I think it’s fair to say that the return expectations in Europe are of course very much linked to the fact that we have negative yields, and every asset class is, somewhat, feeling the gravity of that fact. So, for sure it will be a challenge in liquid asset classes for the foreseeable future. And for demographic reasons, Europe will not be the place where you see global growth, for sure.”

However, Peter does sees attractive possibilities in Europe, for example sustainable investments in green technology, where he says Europe is at the forefront in areas like wind turbines: “We will continue to invest in infrastructure in Europe, an area where I think Europe is in high demand. And even with the gravity to negative yields there is still quite a good yield on those deals. I think that it makes perfect sense in Europe to focus on that area, whereas, if you look at the liquid markets, maybe our eyes are more focused on going further east towards Asia. I think it’s fair to say that more of the deals we see in infrastructure and real estate will come from Asia. That’s why we are also beefing up our presence in Hong Kong.”

 

Responsible investing
With clients like ABP under intense scrutiny, ESG is a key consideration, particularly in the sensitive area of exclusions. Here, APG is driven by what its clients want in terms of ESG criteria, but in line with other pension and asset managers it has taken its own stance in recent years and has integrated ESG in portfolio management.

In terms of ESG, as Peter puts it, “the whole investment organisation is basically doing it”. He explains: “Maybe I’m talking the obvious here, but I think it’s so important that sustainability is embedded in the investment process. Because if you don’t do it, it becomes an overlay and it doesn’t necessarily benefit our ultimate clients. Whereas if it is integrated in the investment process, some of these sustainability themes work to the benefit of the companies that we invest in, and we think that they will become long-term winners by doing it. That will be to the natural benefit of our investors and our pension holders.”

 

Long-term
Peter also has a clear vision on the APG investment organisation: “My role is to help the organisation to be able to be long-term investors. I really think that a professional investment organisation is dependent on two things: hiring a lot of investment talent, and then keeping it together for a long time. It sounds simple, but what is talent changes over time. Really, to attract and keep talent on board is top of my agenda. To make that happen, you need to create a certain level of civility and trust in an organisation. What we can call psychological safety, for employees to feel that they can act within this long-term.”

The use of technology can be beneficial for APG’s pension fund clients, says Peter: “I think technology and digitalisation will play a big role in all parts of the investment process, and the whole value chain of what we offer here. They all have to have a certain element of skill in this area. It’s like languages. They all need to speak English; now they also need to talk a little bit of digitalisation. Or at least to be able to set requirements for how they see their data being digitalised fully. I think that has happened across the company. Then you have an extremely powerful proprietary data warehouse that you can use to benefit clients in the investment process.”

 

Read the full interview by Liam Kennedy on the website of IPE.

Volgende publicatie:
APG achieves important progress toward sustainable goals

APG achieves important progress toward sustainable goals

Published on: 16 July 2019

In 2018, APG has made significant progress in realizing our pension fund clients’ stated ambitions in the areas of sustainability and responsible investment.

 

These results were announced in the Responsible Investment Report 2018, published today.

Nearly € 70 billion in sustainable development investments
By the end of 2018, APG had invested € 69.2 billion (2017: € 55.3 billion) in companies that contribute to the UN Sustainable Development Goals (around 15% of assets under management). The two largest pension fund clients, ABP and bpfBOUW, have specific targets for these Sustainable Development Investments (SDIs) in 2020. APG, together with PGGM, has developed a framework for determining which companies with their products and services contribute to sustainable development.

 

Important progress in inclusion
In 2018, APG has also taken significant steps forward with the ‘inclusion policy’. This means that all 10,000 companies APG can invest in through shares or bonds are assessed in terms of risk, return, costs, and how responsibly they operate. By the end of the year, APG had assessed 7,700 companies (2017: 600) on the basis of these criteria. Our clients have indicated that, from 2020 onwards, they only want to invest in companies that meet all criteria, or that can reasonably be expected to improve as a result of investor engagement.

 

At the forefront of assessing climate impact
Also in 2018, APG received international recognition for its leading position in identifying climate risks and their possible impact on our investment portfolio. In research by the Asset Owners Disclosure Project (AODP), APG is the only asset manager in the world with the highest (AAA) rating when it comes to taking into account the effects of global warming on investments. In 2018, APG carried out additional analysis to determine how fast the global energy transition is progressing and what impact climate change may have on the portfolio, and hence on the pensions of our clients’ beneficiaries.

 

Carbon reduction and renewable energy
The carbon footprint of APG’s equity investments decreased by 28% in 2018 (against the reference year 2014). All our pension fund clients have the stated ambition to reduce carbon emissions in the equity portfolio by 25%. APG’s investments in renewable energy amount to about € 3.25 billion (11% of total investments in the energy sector). With more than 300 other major investors, APG cooperates in Climate Action 100+ to put pressure on 161 companies that are responsible for the most carbon emissions worldwide. 

 

Why we want to invest responsibly
APG wants to enable the pension fund clients to provide their beneficiaries with a good pension in a livable world. By looking at more than just financial factors, APG believes it can make better long-term investment decisions and, at the same time, contribute to a sustainable future.

Volgende publicatie:
APG commits up to €370 million to Australian real estate debt

APG commits up to €370 million to Australian real estate debt

Published on: 1 July 2019

APG has made its first foray into real estate debt within Asia Pacific via dedicated Australian commercial real estate debt manager, MaxCap Group (“MaxCap”).

 

APG has successfully pursued real estate debt strategies in Europe and US for over five years and expects to deploy further capital into such strategies across the Asia Pacific region.

 

In a statement announcing the transaction Graeme Torre, Managing Director and Head of Private Real Estate, Asia Pacific, said:

“As a pension investor, we are continuously looking for attractive investments worldwide that help us realize stable and long-term returns for our pension fund clients. We see the structural shift in the Australian banking sector market dynamics contributing to a convergence of equity and debt returns. A real estate debt strategy therefore offers us the opportunity to access this asset class with an appealing risk /return proposition. We believe that MaxCap, with its on-the-ground knowledge, reputation for responsiveness and proven track record, will be a strong long-term partner for APG.”

 

Wayne Lasky, co-founder and Managing Director of MaxCap group stated “We are delighted to partner with APG on this scalable and sustainable strategy. CRE debt as an institutional asset class in Australia is in an early cycle and we’re looking forward to a long-term relationship with APG to deliver strong risk adjusted returns for its clients and their members.”

 

The investment was done on behalf of ABP, SPW and PPF APG.

 

Read the press release here.

Volgende publicatie:
Ronald Wuijster in FT: “People assume there are no savings left”

Ronald Wuijster in FT: “People assume there are no savings left”

Published on: 20 June 2019

Head of asset management at APG, Ronald Wuijster was profiled in The Financial Times this week, to discuss his asset management work, as well as the many recent pension reform developments in the Netherlands.

 

The Dutch government agreed this month to delay changes to the retirement age, but cuts to payouts by occupational pension funds still loom. The proposed reforms will shift more risk and responsibility on to individual savers. The FT aimed to find out more about these reforms, from the viewpoint of APG, Europe’s largest pension fund manager.

 

“People assume there are no savings left”
Even though the Dutch pension system ranks as the world’s strongest, trust in the Dutch pension system has sunk. Nearly two-thirds of Dutch people are not confident they will be able to retire when desired or maintain their standard of living in retirement, according to a survey by State Street in 2018. Young people in particular feel unfairly treated as their contribution rates have increased but they fear the system will run out of money before their retirement arrives. Wuijster: “There has been so much bad press that people assume there are no savings left at all for pensions. In fact, there are substantial sums of money that have been saved that can be used for pensions.”

 

“Too much risk buffering”
“I feel there is too much risk buffering in the system. That is my personal opinion,” says Wuijster. Dutch pension funds are required to use a highly conservative discount rate to calculate liabilities, which means that most have seen no improvement in their funding position. Occupational pension funds must also maintain sizeable solvency buffers — additional funding — to ensure they can meet payouts. 

 

Making people more conscious about pension
The article highlights the personal pension pot and the ‘clear overview and insight’ service as examples of how APG works to make people more conscious about their pension. “The reality is that 75 per cent of the pension must be earned from investments. The contributions from employers and workers amount to 25 per cent. Savers don’t realize about discounting or the time power of money,” explains Wuijster in the FT profile. It also mentions the Groeifabriek and initiatives such as Kandoor, with which APG is working on innovation for ‘the day after tomorrow’.

 

Achieving a good return in a sustainable way
Over the past decade, APG has delivered net annualized returns (after fees) of about 10 per cent for its largest client ABP, the pension fund for government and educational employees. “We have had 10 years of great performance and we expect returns will be lower over the next decade,” the asset management head cautions in the article.

APG has also already reached its 2020 target for decarbonizing its portfolio and is thinking about fresh objectives in the environmental, social and governance field. Wuijster talks about APG’s second major goal: to contribute to a sustainable world as an investor: “We try to engage with energy companies and to make them aware of the challenges of climate change, but we don’t say no to fossil fuels today. We need to be realistic and look to influence the change.”

Volgende publicatie:
“We are in it for the long term”

“We are in it for the long term”

Published on: 24 May 2019

Interview Ronald Wuijster with Management Scope

 

At APG we ensure that millions of Dutch people have a so called ‘income for later’. “We do this by obtaining a good return, that’s our main aim. Leading on from this we also have a second goal: to contribute as investors to a sustainable world.”, says Wuijster. “We consciously invest in leaders in the area of sustainability and in companies with the potential to become leaders in the future. If you just invest in companies that already have fantastic performances in terms of sustainability, you don’t improve the world.”

 

Attractive employer

This way of working makes APG an attractive employer for investors:
“Many employees find satisfaction in contributing to the pensions of millions of people and exerting influence on companies and governments to make them behave in a socially responsible manner. Our employees can work at these goals with substantial assets behind them, they can enter new markets and look for new investment possibilities with good returns worldwide.”

 

More comprehensive investment process

Regularly, people talk on the possible dilemma of returns versus sustainability. Wuijster says: ‘In practice we’re seldom faced with that dilemma, because we look at our investments from an overall point of view. The portfolio managers themselves take various perspectives into account in their considerations, including sustainability factors. If you look only at economic factors or cash flow, you get a good, but one-sided picture of company performance. Portfolio managers were quick to see that a broader perspective actually strengthened the investment decision. So it made our investment process more comprehensive.”

 

Long term

In the interview, Wuijster underlines the long term focus of APG to maximize pension value for pension funds and participants: “We still see too many shareholders and directors with a horizon of just three months. As long-term investors we believe you have to look much further ahead. We also see this too as part of our purpose: to contribute to shifting companies’ and governments’ short-term horizon.”

 

Wuijster concludes: “At APG we don’t invest on impulse. People sometimes think that our trading floor is powered by testosterone. In this I must disappoint them: it’s certainly not the case. We're in it for the long term.”

 

Read the full interview here (in Dutch)

Volgende publicatie:
APG and Whitehelm Capital invest in Californian fiber network

APG and Whitehelm Capital invest in Californian fiber network

Published on: 8 April 2019

APG and Whitehelm Capital, on behalf of the Smart City Infrastructure Fund, have agreed to partner with SiFi Networks America to invest over $75 million in the deployment of Smart-City ready digital infrastructure in the City of Fullerton, California. The investment will enable the roll-out of the largest privately funded open access fiber network by SiFi in North America.

Arjan Reinders, Head of Infrastructure Europe at APG said “as a long term responsible investor, we are very excited to announce the partnership with SiFi to support investments that promote the development of sustainable societies across select urban areas in the United States.”

 

The project that will be carried out in the City of Fullerton meets the investment objective of the Smart City Infrastructure Fund to improve quality of life and upgrade a city’s physical infrastructure by way of increased digitization.

 

Fullerton has a population of approximately 135,000, with some 50,000 homes and 5,000 businesses. The fiber network will cover the entire municipality area. It is expected that between 33% to 50% of broadband customers (residential and commercial) will migrate to the new network over time. The network will also be used by the municipality to deliver city-wide services, such as wi-fi, public sensors, traffic control signals, CCTV operations, streetlighting control systems, and catch basin flood sensors.

 

Arjan: “We expect attractive long term revenues from th