In approximately two months, the world population will reach 8 billion people. With $ 125 trillion in assets under management, the top 400 leading financial institutions can have an important impact on their lives and the world they live in. But with little time left to turn the tide, it is crucial we join forces - not only with our peers and in our own financial habitat but also and especially with NGOs, governments, science, and society, says Ronald Wuijster, CEO of APG Asset Management.
On 9 November, the World Benchmarking Alliance published the Financial System Benchmark, ranking the 400 most influential financial institutions on their contribution to achieving the SDGs. APG and our largest pension fund client ABP have been allies of the World Benchmarking Alliance for years. Obviously, we are proud that we are the second highest-ranking pension fund investor and that we are in the 30th overall position in this benchmark. It is nice to be acknowledged for our efforts to invest responsibly, respecting planetary boundaries and human rights. At the same time, an average score of 31 points out of 100 tells us that we still have work to do, with little time left.
Emerging markets face disproportionate climate risks
The presentation of the Financial System Benchmark was at COP27 in Egypt, Africa. And that had a reason. Despite its low contribution to greenhouse gas emissions, Africa is highly vulnerable to climate change, as are many emerging countries. As financial institutions, we can help mitigate this, but we need to join forces. It is cooperation that can make change happen.
Investing hundreds of billions on behalf of our pension fund clients, we want to take significant steps to make this happen by allocating more capital to the Sustainable Development Goals in emerging markets. After all, they offer most growth potential for sustainable development. However, it can be challenging to find investment opportunities there because of the accessibility of the market, the relatively small size of the SDG projects, and the higher risk compared to, for instance, Europe and Asia.
We need to join forces
Innovative investment solutions are necessary. In January 2022, we were the first to invest in the ILX Fund, with a USD 750 million commitment on behalf of pension funds ABP and bpfBOUW. This fund is a way to finance specific responsible investment opportunities in emerging and developing economies. But we need to scale up. And for that we need the help of governments, for example by providing investors with first-loss guarantees or opening up the market. Together, we can unlock private capital and speed up the realization of the Sustainable Development Goals.
This does not only apply to emerging countries: it applies to the whole world. The Emissions Gap Report 2022, dated October 27, 2022, is very clear: "Only an urgent system-wide transformation can avoid climate disaster." This report also includes an entire chapter about the importance of the finance system: chapter 7, 'Transforming the finance system to enable the achievement of the Paris Agreement.'
The way forward is unity, partnerships, and collaboration. Not only with our peers and in our financial habitat but also and especially with NGOs, governments, science, and society. We need to meet our counterparts. A one-on-one meeting with the CEO of Greenpeace Netherlands, Anna Schoemakers, made me think. Our differences were far more minor than I ever anticipated - our similarities and common goals far greater. At APG, we started with 'the Reflection Board,' a group of challengers of our board, with people like Gerbrand Haverkamp, the CEO of the World Benchmarking Alliance, and Rutger Hoekstra, associate professor at Leiden University and author of ‘Replacing GDP by 2030’. They do not spare us, fortunately. Together we are trying to bridge the gap.
Ronald Wuijster is CEO of APG Asset Management