Challenges of ESG Integration in a Large Pension Fund Portfolio

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Talk given by Rob Lake
Head of Sustainability
TBLI Asia, Bangkok
29 May 2008

Published in: Business, Economy & Finance
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Challenges of ESG Integration in a Large Pension Fund Portfolio

  1. 1. Challenges of ESG Integration in a Large Pension Fund Portfolio Rob Lake Head of Sustainability TBLI Asia, Bangkok 29 May 2008 Tuesday, June 10, 2008 1
  2. 2. Introduction to APG • Established on 1 March 2008: APG, All Pensions Group • One of the largest independent pension administrators in the Netherlands and one of the largest managers of pension assets in the world • APG Investments manages more than $330 billion • Represents the pension interests of 2.7 million Dutch individuals and 4000 employers • Investments 80% internally managed • 450 investment staff 2 Tuesday, June 10, 2008 2
  3. 3. 3 Tuesday, June 10, 2008 3
  4. 4. € 3 Tuesday, June 10, 2008 3
  5. 5. € 3 Tuesday, June 10, 2008 3
  6. 6. € Risk-adjusted return 3 Tuesday, June 10, 2008 3
  7. 7. € Risk-adjusted return Social responsibility 3 Tuesday, June 10, 2008 3
  8. 8. € Risk-adjusted return Social responsibility Pension scheme members care 3 Tuesday, June 10, 2008 3
  9. 9. Assets in our business € Risk-adjusted return Social responsibility Pension scheme members care 3 Tuesday, June 10, 2008 3
  10. 10. Purpose of Responsible Investment Policy • to improve APG’s risk-adjusted financial return • to protect our reputation by demonstrating social responsibility 4 Tuesday, June 10, 2008 4
  11. 11. Responsible Investment Policy • Integrate ESG as widely as possible across the portfolio • Compliance with UN Global Compact • Active corporate governance and voting • Invest in sustainability solutions • Engage with policy-makers • Exclude certain weapons 5 Tuesday, June 10, 2008 5
  12. 12. Integration into investment processes What it is/does • Broader and deeper analysis of key trends and issues • Better understanding of risk and opportunity • Identify new themes • Build stakeholder trust 6 Tuesday, June 10, 2008 6
  13. 13. Integration into investment processes What it is/does What it is not/does not do • Broader and deeper analysis of • ‘Deepest green only’ key trends and issues • Large-scale exclusion • Better understanding of risk and • Campaigning opportunity • Identify new themes • Build stakeholder trust 6 Tuesday, June 10, 2008 6
  14. 14. Equity strategies • Fundamental – bottom-up research, key issues, dialogue with companies, no mechanistic link to valuation • Thematic – issues and trends • Quant – under development: ratings etc 7 Tuesday, June 10, 2008 7
  15. 15. Investor and corporate responsibility • Seek to ensure companies operate in accordance with legitimate international standards – UN Global Compact • Screen whole portfolio • Dialogue with companies that fall short of these standards • Divestment is final option – if company does not improve and risk to us as an investor is unacceptable 8 Tuesday, June 10, 2008 8
  16. 16. Alternatives • Timberland must be certified to FSC or, in the US, SFI • Infrastructure – dialogue with managers on environmental and social impacts – e.g. Equator Principles • Agricultural land – social issues in southern Africa, environmental in Eastern Europe • PE – developing dialogue through arm’s length PE partner AlpInvest – look at selection and monitoring of GPs • Real estate – developing dialogue with fund managers 9 Tuesday, June 10, 2008 9
  17. 17. Invest in sustainability solutions • Carbon funds – €500 million * projected CO2 reduction of 75-80 m tonnes 2008- 2013 • Clean technology private equity - €250 million • Renewable energy infrastructure – €100 million • Sustainable forestry in Mozambique - €60 million • Microcredit - $50 million 10 Tuesday, June 10, 2008 10
  18. 18. Conclusions • ESG is core business • Risk-adjusted return • Licence to operate 11 Tuesday, June 10, 2008 11

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