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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
131 Publications

Investors urge South Korea to step up its climate efforts

Published on: 14 October 2021

APG lead signatory of pressing letter to Korean government

 

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

 

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

 

Companies need clear climate policies

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

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

 

No coal expansion

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

 

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

Volgende publicatie:
APG invests €195 million in first EU green bond

APG invests €195 million in first EU green bond

Published on: 12 October 2021

EU further strengthens its position as sustainable finance leader


The EU has issued its first green bond. The proceeds will be used to finance the economic recovery in the wake of the Covid-19 pandemic. “As a committed labeled bond investor, APG is enthusiastic about participating on behalf of our clients in the EU’s long-awaited debut issue”, says treasuries portfolio manager Chris Lam. APG has been allocated €195 million in EU green bonds.


This inaugural NextGeneration EU (NGEU) green bond is part of a large economic recovery package (worth around €800 billion) to support EU member states in tackling the consequences of Covid-19. Around 30% of the funding is earmarked for green bonds and will focus on environmental and climate-related investment. According to Oscar Jansen, who manages a portfolio of euro-denominated credits, this week’s €12 billion inaugural issue is just the first step on a path which will establish the EU as the world’s largest green bond issuer. “It underscores Europe’s leading position in sustainable finance”. In 2020, APG already invested in the

EU’s SURE social bond, the proceeds of which help reduce the negative social impact of the pandemic.

 

Supporting member states’ sustainable recovery

According to Lam, this event is a milestone for both Europe and the green bond market. “This issue will give investors unprecedented access to financing green projects across a range of countries that will help the EU achieve its ambitious climate goals. Energy-efficient infrastructure and transportation, and renewable energy investments will help rebuild post-Covid Europe and reduce greenhouse gas emissions. But there will also be funding available to stimulate innovation and finance research to aid green transition”. 

 

The EU’s green bond framework has been drawn up in alignment with the market standard – the International Capital Markets Association’s green bond principles – and positively assessed by second-opinion provider, Vigeo Eiris. It identifies nine investment categories in which it will finance green investments and reforms via its member states recovery and resilience plans.

Solid framework, monitoring and reporting to mitigate risk of greenwashing

As instigator of the EU Taxonomy – a classification system for environmentally sustainable investments – and the soon-to-be-implemented EU Green Bond Standard, the EU has blazed a trail for establishing a regulatory framework for sustainable investments and for measuring their impact across a range of industries. In the case of this issue, where individual countries will submit plans showing how they intend to allocate funds, ensuring transparency and monitoring how the proceeds are actually used will require substantial oversight at EU level. The allocation reporting will be verified by an external auditor and environmental impact will be measured according to standard climate impact reporting metrics.

Jansen is not unduly concerned about greenwashing. “With the solid regulatory structure the EU is building and the emphasis on the ‘Do no significant harm’ criteria for investments, there is a strong focus on ensuring that the proceeds of this bond will be used for truly green investments,” he says. “The diversity in the potential use of proceeds in an issue like this enables us to maintain a broader and more diversified exposure to a variety of green investments. Boosting the demonstrable impact of our portfolios is a crucial part of ensuring that our pension fund clients meet their ambitious responsible investment goals.”


APG is one of the world’s largest labeled bond investors and committed to supporting this market’s growth and development. At the end of last year, APG organized a webinar where representatives from the investment world and the EU examined the planned support program, its potential impact on the labelled bond markets and the important role investors have to play.

 

At the end of 2020, we had invested €12.2 billion in green, social and sustainability bonds on behalf of our pension fund clients. Our APG Guidelines for Green, Social and Sustainable bonds explain more about our policy for investing in labeled bonds. 

Volgende publicatie:
"Automation is more than replacing people with machines"

"Automation is more than replacing people with machines"

Published on: 12 October 2021

Climate change and digitalization leave no sector untouched. Anna Pot, Manager Global Responsible Investment & Governance Netherlands at APG, conducted a study into the consequences for employees. "Employees are especially important for companies to survive these changes. Committed, trained and flexible employees help a company to adapt and innovate."

 

For twelve years now, Anna Pot has been studying how companies treat their employees, something that is also referred to as human capital management. She spoke to companies about issues such as child labor in the cocoa industry, workers' right to join unions and working safely during the coronavirus pandemic. Her most recent study highlights three major trends - transitions - that have a major impact on employees, namely automation, digitalization and climate change. She makes suggestions for critical questions that investors can present to companies in this respect.

 

 

How does climate change affect employees?

"Fossil fuels are slowly but surely making way for renewable energy. Coal mines are closing. Climate change threatens industries that employ huge numbers of people, while it is still unclear exactly how many and where new jobs will be created. According to estimates of the International Labor Organization, there are 24 million, in industries such as clean energy generation, electric vehicle manufacturing and energy efficiency. But it's not just about jobs. The requirements attached to the knowledge and skills of employees are also changing. Under pressure from society and green regulations, companies have to switch to a climate-neutral business model, encouraged by investors such as APG. Innovation is becoming increasingly important. We already see this trend at car manufacturers, who are now switching from combustion engines to green engine technology en-masse."

 

What's new about the conclusion that automation is costing jobs?

“The conclusions from studies into this issue are not unequivocal. One study predicts a loss of two billion jobs, the other predicts millions of new jobs will be created. Automation is more than replacing people with machines. Automation also creates a need for other skills, for example, because people and machines work together. Toyota has a nice term for this: jidoka, i.e. automation with a human touch. If they want to remain competitive, companies must constantly improve their digital systems. The economy is therefore becoming increasingly knowledge-intensive. Machines are taking over routine tasks and people are being required to innovate and be more creative."

 

How do companies benefit from treating their employees well?

"Companies going through major changes need the support and knowledge of their employees to make them successful. They recognize that qualified, flexible and committed people are indispensable to be able to continue to innovate and adapt. Companies have identified human capital and innovation as their top priorities for the coming years. They have to think about how they can stimulate the creativity and innovative capacity of employees. In the battle for top talent, companies want to be known as a good employer. This is a crucial condition for wanting to work for a company, especially for the young generation. To be innovative, companies must create the right conditions in which employees can be creative, dare to experiment and make mistakes. Employee engagement is needed to keep them on board and make the transition effective."

 

Can you name a company that does this well?

"You wouldn't expect it after Dieselgate, but Volkswagen is a front-runner in this area. They have committed to allowing the transition to take place entirely on the basis of natural attrition, i.e. without laying off people. They have extensive programs in which they train employees to make the change. And it's not just about mechanics who have to switch from combustion to electric engines, but also about office workers who learn new things, such as programming or analyzing data. With digital skills, they can make the transition to other departments within the company or even join a different company. Incidentally, we are still in talks with Volkswagen about the aftermath of Dieselgate. We're asking the company to create a more open corporate culture and establish a truly independent supervisory board."

 

And what if companies don't do this?

"Companies that don't treat their employees well miss out on bringing in top talent, they run the risk of jeopardizing operations, or sustain reputational damage due to abusive labor practices. And it goes beyond that. If we as a society do not deal well with these major shifts, it can cost many people their jobs or significantly affect the quality of their work. This will mainly affect the less educated, poor and vulnerable groups, resulting in an increase in social discontent."

 

What does APG ask of companies? What does 'treating employees well' mean in specific terms?

"Our minimum requirement is that companies guarantee safe working conditions for their employees. We use the standards of the International Labor Organization. Safe work and healthy labor relations are also taken into account in our sustainability criteria. If necessary, we engage with companies to improve their working conditions. We want to know about the strategies of companies that are in transition. We ask them for a skill gap analysis: what skills do your employees have now and which ones are still lacking? And how do you get from A to B? Are you going to fire people and hire new ones? Are you solving it through natural attrition, or are you training your current employees? A year and a half ago, we asked the automotive industry to conduct such an analysis. At that time, hardly anyone did it and now, almost all car manufacturers are working on it. Ford has already included the analysis in its annual report."

 

In addition, APG sets requirements for company training programs, says Pot. "We want companies to report on those programs and show their impact. Employees must be included in the transition of the company. Clear communication, training and the adoption of new expertise are key elements in that respect."

 

You have years of experience in the field of employment rights. What was the biggest eye-opener for you during this study?

"We've always paid attention to the social component of sustainability, but this aspect has really taken off since the corona pandemic and the emergence of transitions. Especially the companies themselves now see the importance of it."

 

What will you do with the results of the study?

"Companies with good human capital management are attractive to us as an investor. Studies show that investors who invest in these types of companies perform better on average. We therefore discuss our findings with our portfolio managers and how they can use them in their investments. Our paper contains specific suggestions for questions they can ask companies in transition. It's a pretty long list. If you only have five minutes, I'd ask three. First: what is your strategy for human capital management? Second, how does it fit into the company's long-term strategy? For example, is it a driver of innovation, or customer satisfaction? And third: how do you measure progress as a board? These three questions give a pretty good idea of how seriously a company takes human capital management."

 

Volgende publicatie:
APG invests in responsibly managed FSC forests

APG invests in responsibly managed FSC forests

Published on: 4 October 2021

On behalf of pension fund client ABP, APG has acquired a significant direct interest in Wenita Forest Products (Wenita), the largest producer of forest products in Otago, New Zealand. Wenita manages a plantation estate comprised of approximately 30,000 hectares of Forest Stewardship Council (FSC) certified forests in New Zealand. This means that in an area more than three times the size of the province of Utrecht, the conservation of biodiversity and the economic and social well-being of local communities and employees are paramount. The acquisition expands APG’s sustainable investment portfolio and direct investments into responsibly managed forestry assets.


Wenita is among the largest timberland estates in New Zealand and has a three-decade track record of successfully supplying forest products to local and international markets. With extensive experience in plantation estate management and established infrastructure, the company also provides a range of responsible forest management solutions to other forest owners. The estate is predominantly comprised of Radiata Pine forests, which serve as an integral raw material used in a wide variety of end markets as houses, veneer as plywood.  

 

Globally, about 15% of greenhouse gas emissions are caused by deforestation. Climate reports from the International Energy Agency and the UN Climate Panel (IPCC) clearly show that global warming is still going way too fast. Like many of the pension fund participants, APG and ABP are also concerned about the climate.

 

The forest’s investment attributes offer strong alignment with APG’s ambition to seek opportunities that fight climate change, protect biodiversity and deliver sustainable returns for its clients. Due to the substantial carbon sequestration characteristics of the forests, the acquisition presents APG with an opportunity to support efforts to reduce embodied carbon within New Zealand and international construction and housing markets. All Wenita forests are also certified according to FSC standard, which means that in an area more than three times the size of the Netherlands province of Utrecht, the preservation of biodiversity and the economic and social well-being of local communities and employees are taken into consideration. As such, Wenita forests not only provide a good investment return for ABP participants, but also contribute to a liveable planet.

Ben Avery, Senior Portfolio Manager at APG commented: “Wenita offers an established platform with over 30 years of operating history, immediate access to a significant woodflow profile underpinned by a high quality and large scale FSC-certified softwood forest resource capable of delivering ABP attractive risk-adjusted returns in a sustainable and responsibly qualified manner. This new investment is a further step in our strategy to support global decarbonisation ambitions and ABP’s transition to a net zero environment."

APG is making the investment together with the UK pension provider Pension Protection Fund (PPF). Under the agreement, together the two organizations will acquire a controlling 62% interest from Sinotrans NZ, a local representative of the Chinese logistics and transport giant Sinotrans. A New Forests-managed fund, the Australia New Zealand Forest Fund 2, has owned the other 38% shareholding since 2018 and will remain invested alongside APG and PPF.

 

This investment will enable APG, on behalf of ABP, to contribute to the realisation of the Sustainable Development Goals (SDGs). The SDGs were established in 2015 by the United Nations with a view to creating a better and more sustainable world.

Volgende publicatie:
APG infrastructure investors win an award

APG infrastructure investors win an award

Published on: 1 October 2021

Best Real Assets & Infrastructure Investor of the Year. With this prestigious IPE Global Award, APG outshone no fewer than twenty other large institutional investors across the world this month.

“We are incredibly proud of this. IPE is an independent, impartial organization, one that has a good reputation in the marketplace. So this Global Award means a lot to us,” Jan-Willem Ruisbroek, head of investment strategy in infrastructure at APG, tells us. “The entire team won this award – forty infrastructure specialists at our New York, Hong Kong and Amsterdam offices.” What was the jury’s opinion on APG’s strategy for Real Assets & Infrastructure? Ruisbroek reads from the jury’s report: “A mature strategy in sustainable infrastructure, rewarded with solid returns. APG’s reference to megatrends is innovative and has guided investment decisions well.’

APG’s Infrastructure team does not invest in stocks or bonds. Instead, it invests in companies that are not listed on the stock exchange, with the aim of achieving long-term, stable returns. Its portfolio is quite broad: from transport (airports, toll roads, harbors, trains, railways) and telecom (transmission masts, fiber optic cables) to energy generation, for instance wind and solar farms and transporting energy. Out of the total invested assets of 567 billion euros, APG has invested around twenty billion euros in infrastructure.

 

Contribution to welfare

The emphasis in this is increasingly on improving sustainability or supporting the transition to a climate-neutral energy supply, Ruisbroek recounts. “Our aim is not only to achieve solid investment returns for our pension fund clients, but also to produce tangible benefits that contribute to the well-being of the public. As an example, we have proven to the IPE jury that we invest a lot in wind and solar farms that have yet to be built; we consciously take more risk with this than with a comparable investment in existing infrastructure. We can do this because we have the knowledge and expertise in house, so we are in a position to assess the risks properly.” The returns on this kind of “entrepreneurial investment” are higher, relatively speaking. An example of this is APG’s investment in a wind turbine project in Oostflakkee, which Kallista Energy, a French renewable energy producer, has since built.

Another trend that APG is responding to with its investments is digitization. Ruisbroek elaborates: “Future generations will be using more and more data. That is why we launched a joint venture together with KPN, for the large-scale rolling out of fiber optic connections in the Netherlands. By replacing the old copper network with high-speed internet connections using fiber optic cable, KPN can offer its consumers as well as businesses better support for their digital operations.”

 

On the picture: Jan-Willems colleague Robert Jan Foortse, who accepted the award.

Volgende publicatie:
“To us, it’s achievements that count, not labels.”

“To us, it’s achievements that count, not labels.”

Published on: 24 September 2021

ABP’s investment policy is being put under increasing scrutiny, in which various advocacy groups are serving as the key “watchdogs”. How do you deal with this as a pension fund and administrator? And what effect does it have on your policy? Diane Griffioen, Head of Investments at ABP, and Claudia Kruse, Head of SRI at APG, discuss this in PensioenPro. “I think we are quite ambitious.”

 

Every year, the Dutch Association of Investors for Sustainable Development (VBDO) compiles a list of the most sustainable pension funds. ABP is once again at the top of the list. This seems to stand in stark contrast with current criticism on the fund and its administrator’s SRI policy. Advocacy groups accuse ABP of being in agreement with Shell’s climate policy, which they believe is lacking ambition.

These are signals that are taken seriously, and which contributed to ABP’s decision to start recalibrating its policy straight away. In an interview with the pension professional journal, Griffioen says: “In 2020, we reviewed our SRI policy, examining the long-term situation. This included a vision for 2050, objectives for 2030, and short-term goals for 2025. We are achieving these goals, but concurrently we are recognizing that negative effects of climate change are happening faster than we thought. The question is if Net Zero will be enough in 2050. We have to work harder. This doesn’t apply to us alone, but to all parties concerned: the corporate community, investors, politicians. We want to be a frontrunner in this field. That’s why we’re going to formulate new goals.”

 

20 percent in Sustainable Development Investments

Part of the current – as yet unrevised – policy is ABP’s intention to invest 15 billion euros in the energy transition. The question arises: Is that ambitious enough? “Two years ago, our target was 15 billion euros. That’s what we’re looking at today. I think we are quite ambitious. Those 15 billion euros is not all. We also aim to put 20% of our assets in SDIs by 2025.”

 

Credibility threshold

The interview with the two ladies at the top continues with their vision on engagement. Diane: “We do not exclude any sectors, with the exception of the tobacco industry and nuclear weapons. We regard the companies we select with a critical eye, and we want them to deliver on their promises. But we do apply a lower limit; a credibility threshold.” The interview also examines the current mishmash of sustainability laws, regulations, and labels. Kruse: “This multiplicity is part of the phase we are in now. As far as we are concerned, it’s achievements that count, not labels.”

 

Read the entire interview in PensioenPro. Note: the interview is accessible exclusively to subscribers.

 

 

 

Volgende publicatie:
“Would a monkey invest as well as an investor?”

“Would a monkey invest as well as an investor?”

Published on: 23 September 2021

Current issues related to economics, (responsible) investing, pension, and income: Every week, an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap about the question of whether you can beat the market with active investing. “Not as a private investor. But as a pension fund you are in a fundamentally entirely different position.”

 

Give a blindfolded monkey some darts, get him to throw a bunch at the newspaper’s stock page and you’ll get an equity portfolio that will yield the same as a professionally assembled one.  What Princeton professor Burkon Malkiel meant when he made this claim in 1973 was that stock prices show a random and unpredictable course. In other words, deviating from the stock index by investing in specific stocks from that index - i.e., an active investment strategy - does not provide additional returns without additional risk, and therefore makes no sense.

 

Does this claim hold water? Knaap says it probably does for  the private investor. Does this mean that a pension fund is also better off investing its entire capital in the index? No, the economist asserts, because a pension fund is in a fundamentally different positition. Partially because it has investment options that require scale, professional knowledge, and staying power. These types of investments, which a private investor does not have access to, are a source of extra revenue for pension funds.

 

Not the only smart investor

Knaap: “Malkiel was right in the sense that so-called stock picking does not make sense for private individuals. You are not going to be the only smart investor who analizes a company and tries to predict the price movement of that stock based on that analysis.  Information is usually factored into prices - prices reflect expectations. With that assumption, it is not possible for a private investor to beat the market with active investing. In that case, it is better to invest in the entire stock index. And that is possible today with inexpensive index trackers.”

 

However, there is a world of difference between investing in equities as an individual and investing as a pension administrator, which invests total assets of 620 billion euros for its clients. First of all, because a pension fund must match its investments to the (payment) obligations to participants, a process called asset-liability management.

 

“If you let the proverbial monkey invest in stocks, the choice to invest only in stocks is already made. But do you want to invest in shares at all, and if so, how much of your capital do you want to invest in them? Two thirds of our investment portfolio consist of other investment categories. These include bonds, real estate, commodities, infrastructure and loans to companies. As a pension fund, you have to decide which categories you want to invest in, and in what proportions. In such a way that you can pay out the right pension amount to each participant at the right time. This requires a great deal of analysis, because it is quite complex and there is no one right method.”

 

No lists

A pension fund also differs from a private equity investor because its position is better in terms of information, and because participants expect more from their fund than just a market return.

Knaap: “We talk to the companies we invest in about sustainability and good corporate governance - by voting at shareholders’ meetings and denouncing any abuses, for example. We  are familiar with companies as shareholders, as discussion partners, and also from the debt market. And the same applies to their competors.  Compared to the private investor, you therefore often have better information and can perform better analyses. Of course, that also involves costs, but in this way we think we can beat the benchmark - the index. And if you look at it over a longer period, our stock and corporate bond investors are doing the same, by a wide margin.”

 

And thirdly, perhaps the most fundamental reason why you can’t compare APG to a private investor: An investor of this scope can invest in assets that are not an option for the individual. Knaap: “You can only invest in asset categories like infrastructure and loans to companies if you have enough capital for that. In addition to scale, you must also have the required knowledge to be able to invest in them. For certain assets, in China for example, you must have considerable local knowledge. There are no lists of such investments to choose from, as there are at a stock exchange. You really have to look for them. Our stake in the joint venture with KPN for the rollout of fiber optics only becomes an asset once we have established the joint venture with KPN. But there is an entire process that precedes that. And you wouldn’t send a monkey to Rotterdam for that.”

 

Sell quickly 

Knaap continues: “Moreover, you invest in such assets for the long term. You don’t just sell illiquid investments like that overnight. As a pension fund, you are in an excellent position to invest in a certain asset for a long period of time. It is precisely in the markets where patience is required that we are currently seeing the best opportunities. As a pension investor, you can beat the index by investing in the more illiquid, less accessible markets. Liquid markets, such as the stock market, still have a function, because you also need assets that you can sell quickly if necessary. But for large pension funds, active investment in illiquid assets is currently a major source of return. And this works out in the favor of the participants in the long run.”

Volgende publicatie:
APG invests €360 million in Spanish and UK green sovereign bonds

APG invests €360 million in Spanish and UK green sovereign bonds

Published on: 22 September 2021

The growth of Europe’s sovereign green bond market continues unabated as, within the space of two weeks, two relative latecomers, Spain and the UK swell the ranks of sovereign issuers. APG has invested in both of these latest new issues on behalf of its pension fund clients, receiving an allocation of €99 million in the Spanish bond and £224 million (approximately €261 million) in the UK’s issue.

 

In 2020 and 2021 so far, European sovereigns Sweden, Germany and Italy have all issued inaugural green bonds and with the first green issue from the Next Generation EU (NGEU) fund penciled in for October, existing issuance records look set to be broken.

 

Impact

Green bonds are issued by companies, governments and government-related entities to fund climate-related or environmental projects. Their transparent use-of-proceeds structure makes them appealing to investors as you can more easily assess the impact your investment has. Europe is at the forefront on regulation and reporting on green investments and the EU taxonomy that is currently being implemented will raise the bar still higher. The labeled-bond market’s popularity is underscored by the investor appetite for these new issues. The € 5 billion Spanish issue was 12 times oversubscribed and the UK’s £10 billion green gilt around 10 times.

 

Spanish inaugural issue supported by strong green-bond framework

Spain has committed to ambitious climate and energy targets in terms of emission reductions, renewable energy, energy efficiency and enhancing climate resilience. According to second- opinion provider Vigeo Eiris, bonds issued under the Spanish sovereign green bond framework will make an ‘advanced’ contribution to sustainability, the highest score on VE’s four-point scale. The country’s framework is also aligned with the four core components of the ICMA’s Green Bonds Principles and best practice as identified by VE.

 

According to the framework, there are seven eligible categories to which Spain’s green bond proceeds could be allocated. These are renewable energy, clean transportation, energy efficiency, sustainable water and wastewater management, biodiversity and natural resources, pollution prevention, and adaptation to climate change. The lion’s share of the proceeds is likely to be earmarked for clean transportation. These are focused on improvements to the national railway system and investments in railway infrastructure, promoting the shift towards a clean transportation system.

 

The first sterling-denominated green government bond

This first sovereign issue will be a shot in the arm for the sterling sustainable fixed income market. In April, the UK government set an ambitious target to cut emissions by 78% by 2035 compared to 1990 levels. The categories to which the UK bond’s proceeds will be allocated closely mirror those of the Spanish bond. The largest sum will also be allocated to financing clean transportation, for example, by funding plans to decarbonize the UK’s bus fleet with 4,000 new zero-emission buses.

 

The UK’s green-bond framework is also aligned with the Green Bond Principles but scores one grade lower on its contribution to sustainability than the Spanish framework (robust instead of advanced). In its second opinion, VE also indicates some areas for improvement, for example, in the categories relating to pollution prevention and control, energy efficiency, and living and natural resources. These three areas are relatively small in terms of the percentage of funds to be allocated. However, APG has raised some questions with the UK Treasury on the first of these categories where proceeds are earmarked for carbon capture, usage and storage. CCUS qualifies as an EU-taxonomy eligible sector and does have a role to play in the energy transition, but the UK green bond framework currently lacks clarity on industries and thresholds. As is the case for all our green bonds, APG will follow-up on this issue, critically assess the allocation report, which also contains material developments relating to eligible green expenditure, and ensure that the bond continues to fulfill the APG Guidelines for Green, Social and Sustainable bonds.

 

Green bonds are an effective tool to contribute to sustainability ambitions

One advantage of sovereign and government-related issues is that they give investors the opportunity to invest in large public infrastructure projects that have a direct impact; projects where it is more difficult to gain exposure via the corporate bond market, for example. As a result, these new green bond investments help contribute to our pension fund clients’ ambitions as long-term responsible investors. Both ABP and bpfBOUW, APG’s two largest clients, have set ambitious targets to increase the percentage of assets they invest in companies or projects that contribute to the UN’s Sustainable Development Goals (SDGs) by 2025.

 

Major player in the sustainable bond markets

APG is one of the world’s largest labeled bond investors. At the end of 2020, APG had invested €12.2 billion in labeled bonds (green, social and sustainability bonds) on behalf of our pension fund clients, €3.9 billion of which was in sovereign bonds. In late 2020, APG invested in the EU’s SURE inaugural social bond, the proceeds of which are being used to reduce the negative social impact of the Covid pandemic.

Volgende publicatie:
APG signs the Global Investor Statement to governments on the climate crisis

APG signs the Global Investor Statement to governments on the climate crisis

Published on: 15 September 2021

APG supports an international investor initiative calling for world leaders to step up their efforts to combat climate change. Why are ambitious national climate policies crucial for investors who want to contribute to the Paris Agreement goals? Four questions and answers that explain more about why APG has signed the Global Investor Statement.

 

Why is it important for investors that governments step up their ambitions?

Government policy is crucial for creating an environment that promotes large-scale private investment in the energy transition. The signatory investors highlight the gap between the commitments governments have made so far and the efforts required to limit global warming to 1.5 ºC. Many of the commitments in the current nationally determined contributions (NDCs) are insufficient to reduce global carbon emissions by 45 percent by 2030 (from 2010 levels). This is the target that needs to be achieved to stay on track to reach net-zero emissions in 2050 or sooner. Many countries also continue to subsidize fossil energy and invest in carbon-intensive infrastructure, including coal-fired power plants, while at the same time insufficiently incentivizing private investment in net-zero solutions. "This reduces our ability to properly allocate the trillions of dollars needed to support the net-zero transition,” the statement says. 

 

What is this initiative exactly?

International investors are urging world leaders to rapidly implement a number of policy steps in the fight against climate change. These steps are, amongst others; step up national climate ambitions for 2030 to help achieve a carbon neutral world by 2050 or earlier; optimize conditions for investments in climate solutions by, for example, introducing realistic carbon prices and abolishing fossil fuel subsidies; and to require companies to report on their transition plans in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

 

Who signed the statement?

This statement to world leaders is supported by 587 international investors – including APG. Together, they manage nearly € 39,000 billion in assets, representing an estimated 40 percent of all global assets under management. This initiative comes in the run-up to the important UN Climate Conference (COP26) in Glasgow in November. In August, the UN Climate Panel (IPCC) published an alarming report, which stated, among other things, that the physical consequences of climate change are observable right now, and that in order to combat global warming, carbon emissions must be quickly and drastically reduced.

 

Does this mean investors are shifting responsibility to governments?

Of course, asset managers and pension funds have their own responsibility when it comes to combating climate change. This is explicitly acknowledged in the investors’ statement. “In this shared global crisis, investors and governments each have a responsibility to act swiftly and boldly”. So investors and governments must join forces. This is why our pension funds have already set a range of ambitious targets for reducing the carbon footprint of their equity investments, phasing out investments in coal mines and tar sands and investing in climate solutions. ABG’s largest client ABP announced in June that it would further strengthen its sustainable and responsible investment policy.

Volgende publicatie:
APG investment connects 1 million American households to fiber glass

APG investment connects 1 million American households to fiber glass

Published on: 14 September 2021

APG invests, on behalf of its pension fund clients, 500 million dollars in the deployment of fiber glass in the United States. To that end, APG takes an interest of 16.7 percent in the American fiber glass production company SiFi Networks America Limited (SiFi). APG establishes a joint venture with SiFi, intending to actually realize those connections.

The collaboration ensures that over a million households in several American cities, for whom no fast internet is available yet, will be connected to fiber glass.

 

The importance of a stable, reliable and fast internet connection became evident in the past year and a half when many people were forced to work from home. The new joint venture between APG and SiFi mainly focuses on those areas in the US where other major telecom providers don't really prioritize the construction of fiber-optic connections. The capital injection provided by APG and the collaboration with SiFi help to accelerate the bridging of this digital divide.

 

Also special is that the joint venture's fiber glass network will be open access. This means the network is accessible to third party operators. Once finished, it will enable every household to choose its own telecom provider. SiFi is one of the first American companies working according to this open access model. Meanwhile, SiFi has built such publicly accessible networks in many American cities or has entered into agreements to provide these cities with fiber glass in the future.

 

Smart City Infrastructure Fund

In addition, APG also invested 500 million euros this month in the so-called Smart City Infrastructure Fund, which was established in November 2018. This fund, managed by infrastructure manager Whitehelm Capital, focuses on investments according to the Smart City concept. The aim is to make cities more energy efficient and to make it a more pleasant and efficient place to live. Among other projects, the Smart City Infrastructure Fund is also investing in the further roll-out of fiber in the United States via SiFi. The first investment from this fund was made in 2019 in a fiber optic network from SiFi that was built in Fullerton, California.

 

Attractive return

On the global stage, APG is an active investor in infrastructure and has a growing presence in the telecommunications industry. Patrick Kanters, Managing Director of Global Real Assets, commented, “APG is excited to announce an additional investment with SiFi that will position the Company to provide vital infrastructure to underserved markets and customers well into the future. This partnership also contributes to APG’s ambition to support digitalization and the energy transition. Importantly, this investment is expected to deliver an attractive and sustainable return for our pension fund clients and their participants.”

Volgende publicatie:
APG will be offering sustainable index investments

APG will be offering sustainable index investments

Published on: 8 September 2021

Baskets of shares in sustainable companies, where the client can choose from different sustainability grades. That is how you could describe APG’s new investment product. The launch of iSTOXX APG World Responsible Investment Indices in September 2021 is a joint response by pension administrator APG, index provider Qontigo and asset manager BlackRock to the growing demand for customized, sustainable index products. For an active investor like APG, this step may come as a bit of a surprise at first glance, as the pension administrator is not known as a great advocate of what is irreverently known as “passive investing”. An interview with APG’s Ronald Wuijster (member of the board responsible for asset management) and Ronald van Dijk (managing director of quantitative strategies). “We primarily want to offer the best solution for our clients. In certain cases, that may include an index product.”

 

The difference between an active investor and an index investor is that the former aims for a higher investment return than the average on the stock market or a certain stock market index (weighted average of several important stocks or other investment categories, such as the AEX, S&P 500 or Nikkei 225). The index investor, on the other hand, invests in a basket of shares whose return is approximately equal to that of the market as a whole. The “iSTOXX APG RI Index Family”, launched by APG, Qontigo and BlackRock, consists of five “Responsible Investment Indices” and is therefore an index investment product. That is a step you would not really expect from a pension administrator that has always shown itself to be a staunch active investor.

 

For the first time, APG is offering pension funds the opportunity to invest in indices. Have you fallen away from your faith?

Wuijster: “Let me say first of all that we still advocate for a very active form of investment for those clients who have the opportunity to do so. But that form also involves higher costs and is therefore only attractive from a certain asset size. Not every client has that size. There are smaller funds that want the low cost of an index product, but want to be active on the ESG front (exerting a positive influence on sustainability and corporate governance, ed.). It is precisely for those funds that this product is suitable. In addition, some clients are simply less convinced of investment analyses as a method of selecting certain companies. Ultimately, the client decides what is good for him. We then want to offer the best solution. That solution is somewhere on a continuum, with a very active investment policy at one end and pure index investing at the other end. The “iSTOXX APG RI Index Family” is not the ultimate in active investing, but it does have active components. In short: we have certainly not abandoned our beliefs, because we are still sincerely convinced of the value of active investment and if it is possible for a client, we also advise it. But we primarily want to offer the best solution for our clients. And in certain cases that can therefore also be an index product.”

 

What do those active components consist of?

Van Dijk: “The basis of this product consists of the 'iSTOXX World Index' over which five filters (see box, ed.) can be placed, depending on the preference of the customer. The first filter is 'Exclusions'. By applying that, you exclude companies that do not meet certain sustainability requirements. You could call that the entry level of this product. By applying additional filters, you increase the sustainability content of your investment portfolio. The criteria then become increasingly stringent and when all five filters are applied, the most sustainable portfolio is created. In this way you go further than just investing in, for example, the iSTOXX World Index. That makes it a somewhat more active form of index investing. As far as we know, there is no other index series yet, where a pension fund can consistently opt for an increasingly ambitious SRI policy over time.”

 

Isn’t there a risk that this index product could cannibalize your range of active investment activities?

Wuijster: “This is unlikely to happen, if only because this product offers just a fraction of the investment mix you need as a pension fund. This product is suitable if your pension fund is not of the scale that makes active investment attractive, but you do have serious sustainability ambitions. But if you do have that size, you can still achieve higher returns by active investing.”

 

What does the most sustainable form of investment in the iSTOXX APG RI Index Family look like?

“In concrete terms, you then have the companies from the iSTOXX World Index, which certain companies - the Exclusions - are removed from. The sustainability leaders are then selected from what remains. From these, we then select the companies with low carbon emissions. If you then select the companies that contribute to achieving the UN Sustainable Development Goals, you are left with the most sustainable portfolio. This is then optimized so that the risks are virtually the same as those of the broad index - the iSTOXX World Index.”

Couldn’t APG have offered this product entirely on its own?

Wuijster: “It is always better to seek cooperation for those things that are not part of your standard capabilities. You could look at APG as the architect of the product. We determine the ESG profile and make sure it is appropriate for our current clients and other Dutch pension funds. Then we selected partners that can make it happen.”

Van Dijk: “Qontigo maintains the index on a daily basis. This is a discipline in itself, which is also highly regulated. BlackRock makes sure every day that the right shares are bought and sold, so that the client’s investment portfolio reflects the chosen index. We also have a trading department ourselves but BlackRock already offers many index products and therefore has the experience and manpower to keep track of such an index. Accuracy is very important when tracking an index. APG takes care of the voting policy and monitors whether the companies in the indices comply with the ESG profile we determine. APG also votes for the clients of this product at shareholder meetings.”

 

Does a product like the iSTOXX APG RI Index Family already exist?

Van Dijk: “Certain components of the product can be found in the market, such as index products of companies with a low carbon footprint. But the SDI component (Sustainable Development Investments, companies that contribute to the achievement of the SDGs, ed.) is unique. There is also no index product yet that uses a global standard to define what is an SDI and what is not. In addition, the ESG profile of this index product is truly APG-inspired. We are a Dutch player and we focus on Dutch clients. We invest internationally, but for the ESG profile of this product we try to take into account as much as possible what is going on in Dutch society. The Dutch have a different view of sustainability and good corporate governance than Americans, for example. Perhaps not when it comes to universal issues such as child labor and emissions, but certainly when it comes to executive pay, for example. That Dutch perspective is reflected in this product. In that sense, clients with this product benefit from the fast-growing ambitions of our pension fund clients, including ABP. As a result, we lead the way in knowledge, approach and experience with responsible and sustainable investment. Therefore, in terms of ESG standards, the bar is set high for this product.” 

 

How big are the assets under management that APG expects to attract with this?

Wuijster: “It is not part of our strategy to attract clients purely for this purpose. We see this as an enhancement of APG’s product range, with which we primarily want to serve existing clients. This product may attract new clients, but we expect to serve them integrally. That means not only with equity investments but also with other investment categories. An active approach to investing is inherent in this. By the fourth quarter, 1 billion euros will have been invested in this product, but we cannot yet indicate the size this will grow to.”

 

Can't you offer this product to the private sector too?

Wuijster: “That would be possible, but we do not currently serve private investors. It is not part of our strategy. We are not 'wildly commercial' with this product."

 

Read here the press release.

Volgende publicatie:
“You could have been cycling along merrily without noticing that you’d been cycling on the edge of a ravine”

“You could have been cycling along merrily without noticing that you’d been cycling on the edge of a ravine”

Published on: 31 August 2021

Nobody needs to explain that investing is risky. And everyone knows it can offer real financial returns. Indeed, that’s an important reason why investors start on the stock exchange, sometimes with borrowed money. So where is the risk? And what can we learn from the past? Five questions for APG’s senior strategist Charles Kalshoven.

 

“Let’s be clear: I think it’s good to see young people getting involved in their financial future from an early age,” stated Kalshoven before the first question has even been asked. “And they’re right that it’s just not been worth saving for quite some time, so it’s attractive to look for alternatives. Moreover, you can also learn a lot by getting involved in financial markets. However, there are obviously some pitfalls.”

 

But surely everyone knows the risks by now? Such as “past results offer no guarantee for the future” or “you can lose your investment.”

“Yes, but it can be difficult to imagine those risks. Certainly if you grew up in the period when interest rates just kept getting lower, savings offered no returns, and things were going well on the stock exchanges. Of course, coronavirus caused a crash, but for many people that was actually the right time to start investing. They bought during the dip and their investments are now often worth much more.”

 

What’s wrong with that?

“In principle nothing, but it can, however, give a wrong impression of what the market does. A young generation of investors has never experienced anything other than stock exchanges performing well. But if the past has taught us anything, it’s that a hefty correction or even a crisis will take place from time to time. If you’ve never felt the “pain” of such a situation, you may be inclined to take more high-risk investment decisions. Or you’ve been lucky in making good returns without realizing that the risks were much higher than you thought. You could have been cycling along merrily without noticing that you’d been cycling on the edge of a ravine.”

 

But it’s a fact that stock exchanges are still doing well. So you could say there’s no cause for alarm?

“Nobody can see into the future. What you can see, however, is that the Great Moderation is over – that’s the period in which high inflation was subdued and interest rates kept falling. Stock exchanges made major profits from those falling interest rates and company valuations increased considerably. And high valuations depress expected returns, so you shouldn’t just keep doing what you did in the past. Of course, you can still do really well on the stock exchanges even with those developments. I only want to say that new investors would be wise take into account scenarios that are less rosy than the current stock exchange climate.”

 

So what is your advice?

“Spread and re-balance. If you’re going for the long term, like pension investors, then it’s good to have a broad portfolio with a certain percentage in equities, a certain percentage of bonds, etc., which you come back to periodically. That’s the re-balancing. In fact, you then automatically exchange the categories that are doing well for categories that are lagging behind. It’s a proven method of improving your risk-return ratio. And you prevent that you trade based on emotion. But what’s even wiser is to invest in yourself instead of in equities. A study program often provides good long-term financial returns. And you also get a sense of satisfaction from this.”

 

But what if that study program is really expensive?

“Of course, with an expensive study program, you could invest to finance your study. Some people do this with borrowed money. But obviously, the risks are higher with borrowed money. After all if you lose a part of that money, you’re quickly straddled with debt. We call that the leverage mechanism, which we saw in the equity lease affair in the 1990s. At that time loans were offered for investment purposes, often to inexperienced investors, and loan providers weren’t upfront enough about the risks. When the share prices took a nose-dive in 2001, many people were left with a huge residual debt. In this respect, it’s simply safer to invest using your own money that you can afford to lose.”

 

Also read Daniël’s story who invested his student loan to pay for his pilot training.

Volgende publicatie:
“The advent of 5G is going to create a lot of innovation”

“The advent of 5G is going to create a lot of innovation”

Published on: 25 August 2021

613 Billion euros. That is to APG’s total invested assets worldwide (position at the end of July 2021). The goal: a good pension in a livable world for the pension fund participants. The portfolio is obviously diversified. From investments in wind farms in Zeeland to Australian listed shares in stores. And from safe bonds to the somewhat more fluctuating trade in gold or soy. Who are the people behind these investments? What choices do they make? And why?

 

In this episode of the series The Investors: Frank Dekker, responsible for investments in the telecom and media sector at APG.

 

Telecom companies are installing fiber optic networks at lightning speed. This means more speed and more options when it comes to, for example, 5G, artificial intelligence and the Internet of Things. At the same time, the dynamics in the sector are increasing and telecom companies are attractive acquisition targets. Will KPN be taken over by foreign investors? Who will buy T-Mobile, which is currently in the shop window? What is the impact of such market movements on APG’s telecom investments?

 

Senior portfolio manager Frank Dekker has been following the sector for fifteen years and is responsible for the investments in telecom at APG. This includes KPN, which APG recently entered into a joint venture with. “Very promising,” is what Dekker says about this partnership, which will make it possible to accelerate the rollout of KPN’s fiber optic network. But perhaps Dekker is not entirely objective?

 

Dekker: “Good question. But not correct. As portfolio manager in telecom shares, I am completely shielded from the activities of the people that were involved in this deal. During the period of the deal and its preparation, I was not allowed to trade in KPN shares. Nor was I allowed to communicate with anyone internally about this. We are very strict about this. And we have to be. Anyway, I think the joint venture between KPN and APG is very promising. Because APG’s investment will enable KPN to complete the construction of the fiber optic network sooner. This will allow them to phase out their copper network faster, leading to significant cost savings. Moreover, this accelerated construction cuts potential competitors off from KPN.”

 

What does that competitive field look like in the Netherlands?

“Ziggo merged with UPC a few years ago and then merged with Vodafone. T-Mobile bought two price fighters, Tele2 and Simpel. And then we have market leader KPN. The Dutch telecom market is now very clear, with these three parties. The Netherlands has good networks for mobile phones and landlines. The prices for mobile services have dropped considerably in recent years.”

 

T-Mobile will be sold as soon as possible if it’s up to owner Deutsche Telekom. What does that mean for the Dutch telecom market?

“T-Mobile has a small, fixed network in the Netherlands. Deutsche Telekom would like to be number one or two in every market. In the Netherlands that is probably not going to happen, so that is why the company is going to be sold. KPN or Vodafone Ziggo are probably not allowed to take over this number three because of European competition rules. Whether competition in the Dutch telecom market will increase or decrease as a result of the sale of T-Mobile depends on the new owner. It's hard to say who that will be. Delta is known to invest heavily in fiber optic networks. In a partnership with T-Mobile, that company could provide additional competition on the Dutch telecom market. Right now, T-Mobile largely rents the fixed line from KPN for their customers who still use a landline phone.”

 

APG invests more than average in KPN. How much longer can that go on? 

“Unfortunately, my role does not allow me to go into detail on that. We are looking at a period of three to five years. It is difficult to predict which sector will do better than others. That is why we mainly try to achieve an above-average return within a sector; for example, by choosing the companies that perform best in class and that show the best return-risk ratio. If we look at the Dutch market, Vodafone Ziggo is KPN’s main competitor. That company does not yet have fiber, and has yet to invest heavily in the necessary upgrade of their current cable network.”

 

In general, are telecom companies in the Netherlands really a good investment?

“Investors usually look at the dividend yield. But what you often see is that telecom companies with a high dividend yield are a bad investment. They are paying a relatively high dividend at the moment, but the question is whether that is sustainable. After all, they will have to invest heavily in their networks in the coming years. To us, the underlying cash flows for the coming years, where we try to estimate what the sales and margins will do, is much more important than dividends. We also look at the structure of the telecom market, how the competition will develop. And what the relationship is with the regulator and politics. The corona epidemic has once again shown how important good connectivity is; policymakers will therefore want to stimulate investments in this, for example through regulation. In conclusion, we are seeing a relatively healthy market structure in the Netherlands. The downside for telecom companies is that politicians want low prices for consumers. At the same time, I consider the chance of a price war to be fairly small.”

What would be the impact of such a price war?

“Price wars occur when there are changes in local competition. More competition often means that companies start to stunt and rates drop. That’s nice for the consumer, but not beneficial for the shareholder. With less competition, the chance of price increases is higher and the cost of customer acquisition can be reduced. Our investment philosophy is therefore aimed at staying ahead of price wars. India, for example, is now a more interesting market, since they have gone from fourteen to three telecom providers. But Brazil, Canada and Finland are also interesting. In the US, on the other hand, the likelihood of a price war is rising. There has been a big takeover there, with the result that other players are trying to gain market share in a more aggressive way.”

 

For telecom companies, isn’t the real competition more likely to come from giants like Amazon, Facebook, Apple, Google and Microsoft in the long run?

“Certainly. A lot of value is being created with the digitalization of society. This value creation no longer goes to the KPNs of this world, but to those giants. So that’s what we invest in as well. These American and Chinese companies are increasingly investing in digital infrastructure such as data centers and the submarine cables that carry most intercontinental Internet traffic. These used to be owned by telecom operators, but those days are over. Most of the digital infrastructure that European telecoms companies still own is the last mile, the last piece of the connection to the customer.”

 

5G is central to that digital infrastructure. What will that network do for us in concrete terms?

“Looking back, we can attribute the arrival of Uber to the breakthrough at the time of 4G, the smartphone and data centers. I expect that 5G, along with applications of artificial intelligence, is going to bring a lot of innovations in areas such as self-driving cars, virtual reality, remote-controlled robots that perform operations, drones, you name it. All of which require a tremendous amount of computing power and as little delay as possible. For example, an ambulance transporting a victim with third-degree burns to the hospital, where a doctor can make a diagnosis and prepare the required equipment remotely via a video link. Or artificial intelligence that allows you to perform real-time simulations: for example, what is the probability of an accident occurring with a self-driving car. For this kind of innovation, you really need 5G.”  

 

There is increasing political pressure to ban Chinese equipment from, for example, Huawei, which telecom providers in the Netherlands also use. Does this present a big risk for the Dutch telecom sector?

“Yes, it definitely does. The U.S. is concerned about China’s technological lead in 5G. We’ve seen more initiatives by politicians and security agencies to warn of cybersecurity risks due to ownership of Huawei equipment, for example. Increased scrutiny of Chinese equipment suppliers forced KPN to remove Huawei from its core mobile network. KPN also selected Huawei for other 5G components, such as antennas. Now KPN is in danger of having to remove Huawei from its mobile radio network as well. But not KPN alone: T-Mobile has mostly Huawei equipment in its network. A ban on Huawei will cost telecom providers money, but they can partly compensate for that by charging consumers higher prices in the wireless market.”

 

Finally, even as a large investor, you face competition. How do you differentiate yourself from it?

“The nice thing about working for APG is that we are large scale. As a result, we have above-average access to research, management and alternative data, but are able to keep costs down. That data, especially sector-specific data, is expensive and not every investor can afford it. Anyway, it’s also about what you do with that data. My team and I look at developments within sectors and not between sectors. This is called relative investing. In that sense, we can make full use of our time to investigate the differences between players in the telecom market and to make them work to our advantage.” 

 

And is that working?

“We have outperformed the competition (benchmark) by about 30 percent over the last 11 years, with an absolute return of 12.6 percent per year. So: yes, it’s working well.”

Who is Frank Dekker?

 

He earned a Masters of Finance at the Vrije Universiteit. He has been working in the Fundamental Stock Selection at APG for fifteen years. He manages the portfolio together with colleague Henny Crauwels. This department is characterized by sector knowledge, taking relative bets and investing for the longer term. He is married and has three children. And he lives in Zandvoort.

 

A career in investing

“My father was a carpenter and had a bad back. After he was declared disabled, he started investing privately at home.” So, Dekker was familiar with the concept of investing from an early age. And that has never stopped. “In my spare time I like to read books about investing,” he says.

 

Working method

“I enjoy delving into a subject and forming an opinion about it. I’ve inherited a thick skin. That helps me take a stand that differs from the consensus.”

 

Investment Philosophy

“Many investors look top-down at how the macroeconomy or how certain sectors will develop. We differentiate ourselves by looking at longer-term business trends within a single sector.”

Facts & Figures 

 

What does APG invest in in terms of telecom and media?

Interactive media: Google, Facebook, Snap, Twitter

Broadcasting: Fox, Prosieben, Discovery, Viacomcbs

Interactive home entertainment (gaming companies) Activation Blizzard, EA

Cable & satellite: Comcast, SES

Advertising: (Advertising agencies) Publicis, WPP

Movies & entertainment: Netflix, Disney

 

How much?

The satellite portfolio 1218 invests just over 1.5 billion euros.

 

Volgende publicatie:
“We can still make it, but we'll have to work hard.”

“We can still make it, but we'll have to work hard.”

Published on: 13 August 2021

The report by the United Nations’ IPCC, Intergovernmental Panel on Climate Change, underscores the rapid, human-induced increase of global warming. If we don't take action now, temperatures could rise by nearly six degrees Celsius towards the end of this century. If we do act now, the goals of the Paris Agreement are still achievable. Large companies and investors can make a difference. The question is: Are we currently doing enough to turn the tide? According to Joost Slabbekoorn, senior responsible investment & governance manager at APG, at least we're on the right track. “We have long seen the need to take action and that's exactly what we're doing."

 

The conclusions drawn by the UN report don't really tell us something new: Humans “unequivocally” play a role in climate change, the earth has warmed by more than 1 degree in 100 years (much faster than before), the effects of climate change are felt all over the world, and temperatures will definitely continue to rise in the next 30 years. Whether that's by 1.5 degrees in the best-case scenario or 5.7 degrees in the worst-case scenario depends entirely on the actions we take globally.

 

Reassessing policies

“Yes, the IPCC report makes for very uncomfortable reading," says Slabbekoorn, the person who, together with his team, is responsible for implementing sustainable and responsible investment policy for the ABP pension fund, among others. “But actually, we already knew that things haven't been going well." We have known about climate change for some time. It's with good reason that our focus has grown substantially in recent years in terms of sustainable and responsible investment policies for fund clients such as ABP. But sometimes you know that our approach must and can be more effective, says Slabbekoorn. Conclusions such as those drawn by the IPCC report may then actually be decisive for revising policy. "That's what ABP did recently. We realized that accelerating the energy transition is the only option – and current policies do not adequately make that happen. That's why we’re setting our climate ambitions higher in 2022." ABP is taking this issue very seriously. A panel of scientists at universities is helping us create these improved policies. 

 

Fossil fuel

In addition, APG, along with 32 other large investors, collaborated on the “Net Zero Investment Framework” – a framework that provides guidance on how to tackle climate change. “It's exactly these types of initiatives – as well as our engagement efforts – that allow us to contribute to a liveable world by using our influence as investors to encourage companies to make more sustainable decisions.” But as Slabbekoorn emphasizes, one doesn't make an impact on their own. “As an influential pension investor, I think we have an obligation to do everything within our power. But everyone must do their part.” One option that climate organizations often propose is moving away from investments in fossil fuels. Does the IPCC report mean that APG will advise its clients to completely stop investing in fossil fuels? "Not necessarily," says Slabbekoorn “Ideally, the fossil fuel industry also needs to be part of the solution. But oil and energy companies will need to accelerate their transition from fossil fuels to renewable energy in the coming years. We are paying close attention to their actions in this regard. If things aren't moving fast enough for us, or we lose confidence, we will stop investing in fossil fuels.”

 

Mapping out risks

One of the report's other conclusions is that the effects of climate change can be seen all over the world. The floods in Limburg (the Netherlands), Belgium, and Germany are a case in point, and these sorts of phenomena are also influencing APG's investments. “Changing weather conditions are already impacting our investments. In any case, temperatures will continue to rise. This means that climate change will continue to affect our investments. That's why, for our real estate investments, we're already mapping out risks in case of floods, droughts, forest fires, or rising sea levels. We have also developed a dashboard that shows us the physical risks of climate change by country,” says Slabbekoorn.

 

Ray of hope

“The report, or rather the report's conclusions, truly impact the way we invest. We are taking the right steps, but there is always room for development," says Slabbekoorn, who, despite the report's bleak message, also sees a ray of hope. “The report also states that we can still meet the climate goals by 2050. But to achieve those, we'll really need to get moving.”

Volgende publicatie:
How do environmental disasters impact real estate investments?

How do environmental disasters impact real estate investments?

Published on: 29 July 2021

Current topics with regard to the economy, responsible investment, pension and income: every week, an expert at APG provides a clear answer to the “Question of the week”. This week: Asset Management professional Steve Goossens discusses the impact of climate change and environmental disasters on real estate investments.

 

Hundreds of millions of euros: this amount alone represents the damage caused to the city of Valkenburg when the surrounding region was hit by severe floods in mid-July. This says a lot about the total financial impact of the flooding – and environmental disasters in general. Due to climate change, crises like this are becoming more frequent as well as more severe. With all the consequences – and damage – that this entails. To what extent does this affect investments in both the short and long term?

 

“The impact of climate change on investments is bigger than you might think,” says Goossens, who works in the real estate asset class. And he should know. Together with his team and co-workers from the Responsible Investment Team, he has been focusing on climate-related risks concerning the investments made by APG’s fund clients for more than two years now, primarily for his own department: real estate investments. “If at all possible, the data I collect will also be used in relation to investments in other areas, such as infrastructure.” After all, the impact of natural disasters is not limited to real estate alone. Goossens also examines risks associated with floods, forest fires, droughts, or rising sea levels in relation to real estate, for example. “Look at Amsterdam: droughts have been causing the piles on which the city is built to be exposed above water level for long periods of time. This, in turn, causes the wood to rot and the ground to subside more quickly. This is accompanied by an enormous investment task, which has a direct impact on some real estate investments in Amsterdam and the surrounding area.”

 

Direct and indirect risks

Goossens distinguishes between two types of risks related to climate change on investments: direct and indirect risks. The subsidence in Amsterdam, the flood damage in Limburg, as well as the devastating effect of forest fires on homes elsewhere in the world are all examples of the direct impact that climate change has on investments. “This is quite easy to explain: investment properties suffer damage and part of the costs in relation to this will always be borne by the investor. That, in turn, affects an investor’s returns: the higher the costs, the lower the return.”

 

Then there is indirect damage: “When a disaster occurs, stores may need to stay closed or hotels may not be able to receive guests, which brings certain costs with it. A natural disaster may also force people to move. Not only that: insurance contributions, for example, will also be subject to considerable increases in response to environmental disasters, or certain types of environmental disasters will no longer be covered by insurance. Property owners pay the price of this. Insurers, like us, estimate the risk of disasters like these and base their prices on that. You can count on insurance contributions becoming much higher in the future.”

Our calculations allow us to estimate what it will take to meet the goals at individual investment level

Transition risk

Goossens therefore also draws up risk estimates for the investments APG makes for its funds. This is urgently needed, because it enables estimates to be made of the financial consequences of climate change in the longer term. Investors take this into account when estimating the value of an investment. At least as important is what is referred to as the transition risk: “This is the risk of rising costs in response to the energy transition. In other words: what additional investments are needed to achieve the goals of the climate agreement? Better insulation or new heating systems are examples of this. Climate change is causing the Earth to heat up faster. If we want to combat this and limit the ensuing rise in temperature to 1.5 degrees, as stated in the agreement, this will bring certain costs with it.”

 

Legislation & Regulations

According to Goossens, how much money and which investments are needed in the coming years also depends on legislation and regulations. The requirements set by governments for energy labels is a significant factor in this. “We have no influence on that, but we do know what the ultimate goal is for 2050 and that we need to keep reducing the amount of CO2 we emit.” APG and other large investors have developed the global CRREM standard to measure the transition risk and, in doing so, gain a clear overview of that ultimate goal. This provides insight into whether a real estate investment complies with the Paris Agreement. An office building in the Netherlands complies with the climate agreement if it consumes no more than 14 kWh/m2 of energy, for example. CRREM is stricter with regard to this than the Dutch Green Building Council (the network organization for sustainable construction practices), which applies 50 kWh/m2 as a standard, says Goossens. “Aside from that, the CRREM standard is scientifically substantiated. By applying this standard, we go much further than other organizations in the sector."

 

“Our calculations allow us to estimate what it will take to meet the goals at individual investment level. We then examine the various aspects involved in relation to our long-term real estate investment plans.” Goossens believes that these additional investments are necessary. “The alternative is that the Earth will heat up by more than 2 degrees and that even more environmental disasters will occur. The damage caused by that is many times greater than the cost of accommodating the energy transition.”

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

“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.

 

Read the Press Release.

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.” 

Volgende publicatie:
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.

Volgende publicatie:
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.”

Volgende publicatie:
‘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.

Volgende publicatie:
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. 

Volgende publicatie:
“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.

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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."

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"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)