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.