Challenges of ESG Integration in a Large Pension Fund PortfolioRob LakeHead of Sustainability

TBLI Asia, Bangkok29 May 2008

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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

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€

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€

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€Risk-adjusted return

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€Risk-adjusted return Social responsibility

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€Risk-adjusted return Social responsibility

Pension scheme

members care

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€Risk-adjusted return Social responsibility

Assets in our business

Pension scheme

members care

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Purpose of Responsible Investment Policy

• to improve APG’s risk-adjusted financial return

• to protect our reputation by demonstrating social responsibility

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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

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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

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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

What it is not/does not do

• ‘Deepest green only’• Large-scale exclusion• Campaigning

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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

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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

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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

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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

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Conclusions

• ESG is core business

• Risk-adjusted return

• Licence to operate

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