“Good ratings are nice, but we’re never satisfied”

APG has been named a market leader in engagement by EY. This is evident from the consultancy’s Engagement Maturity Matrix. A good reason to ask Anna Pot, Head of Responsible Investment Capital Markets & RI Communications at APG, some questions about engagement.

According to EY (formerly Ernst & Young), characteristics of a market leader are actively driving positive change and setting the market standard for institutional investors. A good result for APG and its pension fund clients. At the same time, public opinion seems to be increasingly critical. For example, some pension fund participants want their funds to invest as responsible as possible.

How can this be reconciled?

“I think two things are important here. The first is that participants and the media in the Netherlands are critical.  When it comes to responsible investment, the expectations and ambitions among participants and our stakeholders in the Netherlands are high. And that’s actually very good, because fifteen years ago, when we were developing awareness around responsible investment on behalf of our fund clients, it was not such a big topic yet. Today, it is a very important consideration and people have high expectations around it. Pension fund participants are learning more and more about this subject. In that sense, you could say that the pension funds have succeeded in propagating the importance of SRI. And the critical part of the constituency is growing. That means we are offering something that the pension fund participants want from us. In fact, they want us to do even more in this respect.

Another important point is that we were compared to institutional investors abroad in this study. There are also many developments in responsible investment among the other big players but in the Netherlands, we are in the lead. As APG, we are seen as a leader that other parties are happy to work with and support. That leading position also helps us to align other parties with our goal of investing as responsible as possible. That cooperation with other parties is essential to our success and to achieving our sustainability ambitions as well as those of our fund clients. It is therefore important that we are also seen as a leader in the international field. So, I am very pleased with this result.”

When does APG see itself as the leader in responsible investing, when experts like EY think so or when the public thinks so?

“We are never satisfied. We are very ambitious and critical of ourselves and always want better results in responsible investing. After all, our goal is to make the world more sustainable. In any case, it’s nice to see that our efforts are being recognized. And not just by EY. Another example is the Principles for Responsible Investment (PRI), an organization supported by the United Nations. The PRI assesses us annually and it’s always nice when we see growth in that. And then there is the Association of Investors for Sustainable Development (VBDO), which assesses the fifty largest pension funds in the Netherlands in terms of sustainability. Our fund clients are in the top echelons there. Last year, for example, ABP was ranked number one for the fourth consecutive time. In that sense, external assessments are nice, but are they a yardstick? No, they are indications that we are doing well and that we are seen as a leader. Of course, what really matters is the impact of our efforts. For example, a company following up on our engagement requests. Or the fact that we are making our investment portfolio more responsible. Another example is that more companies are attaching green goals to the issuance of their loans (bonds), or that our real estate companies are operating in an increasingly energy-efficient manner.” 

There are many forms of engagement. What is an example of a form in which APG is particularly strong?

“EY specifically mentioned our so-called inclusion policy. This means that we can only invest in a company that lags behind in terms of sustainability if we expect that engagement can lead to improvement. It is a very systematic way of setting priorities in the engagement policy we pursue for our funds. We ask ourselves the question with which important companies in our investment portfolio we can still make gains in terms of engagement. Is it worth our time and energy? Or should we decide to stop engaging with a company if we feel it is not producing enough results? We also take into account that if a company becomes more sustainable, it is a better investment in our portfolio. We score high on this form of engagement, which is very closely related to our investment choices and portfolio. It also earns us a lot of appreciation. It is something in which we are unique, compared to other institutional investors.

We also have thematic engagement processes that we perform on behalf of our pension fund clients and that are seen as leading the way in the market. One example is an engagement path on the transition in the automotive industry. We are asking car companies to become more sustainable and to switch to a carbon-neutral business model. That means they have to manufacture electric cars instead of diesel cars. In this sense, sustainability is about climate targets, but in our commitment we also focus on these companies’ personnel policies. Because whereas manufacturing an internal combustion engine car requires five employees, an electric car requires only one. It also requires different skills. As a company, you can do two things. You can say: we’ll lay off our current employees and look for new ones. Or you can try to use your staff differently so that they can keep their jobs. And that’s what our engagement is all about: make sure that as a car company you also have a strategic personnel policy that focuses on training and retaining staff where possible.”

There’s probably still room for improvement.

“I think we can make the outcomes of our engagement more visible. Conversations with a company we invest in, for example, can lead to a new policy or committee. But how can you concretely reflect the impact of that? If you take the example of the car industry, it’s about how many people still have a job in the end. It is difficult to communicate that in an effective and honest way. Reporting on the impact of our engagement is therefore an important area for improvement. Making the results of our engagement more visible also touches on the point where we started this discussion: the critical note in the Netherlands. We must continue to bring our efforts into the limelight. Also because we think it is extremely important that participants know how we invest their pension money.”