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Investing in solutions

On behalf of its clients, PGGM deploys the steering power of money for a sustainable and habitable world. In 2014, our biggest client PFZW issued the mandate to realise investments of €20 billion in 2020 in solutions for four social issues, i.e. climate change, water shortages, food security and health care. These targeted investments, which we call Investments in Solutions (BiO), not only contribute financially to the returns for our clients, but also create social added value.[1] At the end of 2019, a total of €18.3 billion had been invested in solutions for these themes.

These themes are reflected in the SDGs created by the UN in 2015. The UN identified 17 goals that governments, companies and citizens must work on to make and keep the world sustainable and habitable. In order to follow these goals, PFZW took the SDGs as a guide in the new Investment Policy, which runs from 2020 to 2025. From 2020, under a mandate from PFZW, PGGM will invest more in the SDGs. To that end, we have measured all investments in the SDGs since 2018. Through the dependence of these figures on the annual reports of companies, the data always lags by one year. At the end of 2018, the amount was €38 billion, or 18% of the total assets under management. This is €4 billion more than at year-end 2017.

In the world of responsible investment, the focus is increasingly shifting from financial performance to results that provide an insight into the social value of the investments. In addition to the financial return, what is the actual social impact of responsible investment?

  • 1 To comply with the BiO criteria, an investment must have an actual positive social impact on at least one of the four areas of focus eligible for investment. The investment’s contribution to a solution must be substantial and the social impact must also be tangible: for the company or the project we require that the real impact of the solution is measured, managed and reported. See our website for the criteria
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Investments in Solutions in 2019

Impact investing, to get guilt-free burgers

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Various BiOs were made in 2019. Below are some striking examples from 2019.

Green bond Enel

With this bond, Enel finances and refinances green projects that help to mitigate climate change and protect natural resources. Enel’s strategic plan (2019-2021) includes the goal to sharply increase renewable energy capacity from 42.9GW in 2019 to 53.9GW in 2021, so that the percentage of emission-free production rises from 48% to 62% in the same period.

Green Bond of the Dutch State: first green bond of the Dutch State

In May, the Netherlands became the first government with an AAA rating to issue a green government bond. This bond had a maturity of 20 years and a size of €6 billion. The government expenditure financed with this concerns renewable energy, energy efficiency, sustainable transport and also climate adaptation (the Delta fund). In addition to a report on how the funds are spent, the Dutch State will also report on the estimated impact of the expenditure. The Minister wishes to emphasise the dark green character of the bond with a certificate from the Climate Bonds Initiative, in which PGGM is also a partner.

Apple Green Bond

In the fourth quarter of 2019, Apple issued a green bond with a value of €1 billion. With this, Apple finances projects relating to renewable energy and efficient energy consumption in the production process. The Investment Grade Credit team acquired an allocation in this green bond of €17 million.

SCW Systems

In 2019, PGGM acquired a minority interest in SCW Systems in order to upscale its ‘super-critical water gasification’. This is a revolutionary technology developed in the Netherlands, which converts (wet) organic residual and waste flows primarily into green methane and hydrogen. This conversion takes place under high pressure at high temperatures, so that it can be injected into the existing gas infrastructure without further distribution restrictions.


The Norwegian company TOMRA produces the machines with which drinks packaging is collected for re-use. TOMRA uses the same technology in machines for recycling waste (such as plastic) and sorting different food products, such as fruit, grains and potatoes. TOMRA is a world leader in both fields and is consequently leading in the upcoming circular economy.

Société du Grand Paris Green Bond

Société du Grand Paris (SGP) was formed in 2010 especially to build the Grand Paris Express transport network. This is Europe’s largest infrastructure project, which will expand the 400-kilometre Paris metro network by 200 kilometres of extra track and 68 new metro stations. SGP is wholly-owned by the French State and has the same credit rating and is expected to have more than €35 billion in investment expenditure. These are largely financed with green bonds, as accessible public transport makes a substantial contribution to the climate goals.

Paine Schwartz Food Chain Fund 5: part of the new Private Equity sub-mandate

In 2019, PGGM PE committed to the Paine Schwartz Partners (PSP) Food Chain Fund 5. PSP is a leading investor in the food and agricultural sector and focuses on companies that contribute towards sustainable and responsible food production. Examples of this include companies active in organic fruit production, water-saving irrigation systems and environmentally-friendly pesticides. In addition to financial returns, PSP also devotes attention to the positive impact of its investments on the environment and society.

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The ambitious task that we carry out for our client

In 2020, we want to have invested as much as €20 billion in social solutions.

The task that we carry out for our biggest client, PFZW, is to have at least €20 billion invested in solutions in 2020. At year-end 2019, a total of €17.3 billion was invested in solutions. The ambition lies partly in the fact that we operate in a competitive market and that the investments that comply with the criteria are unfortunately not always available.

Part of the classification of an investment as a BiO is that the social impact is measured and reported each year, or there is at least willingness to do so. This concerns data such as megawatts of sustainable energy generated, number of people with access to affordable care, number of litres of treated water, etc. As a result of this, we now have five years of valuable experience with measuring the social impact of our BiO investments.

We invest in solutions via a specific listed shares mandate that we call Investment in Solutions via Liquid Shares (BOA). The total capital invested in this is €3.7 billion. We also invest in solutions via other investment classes, such as real estate and infrastructure.

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The impact of Investing in Solutions

Investing is a means to an end. It can be a way to contribute to solutions that benefit both people and the environment

Piet Klop
Senior Advisor Responsible Investment

The knowledge that a certain amount of capital is invested in something expected to make a positive social contribution is not enough. This only measures good intentions. We want to establish whether there has actually been a positive impact in terms of a measurable improvement, for this makes an investment an impact investment. Impact calculations are therefore essential. Not only do they help us to communicate the positive impact, but they also benefit the credibility of impact investment. In this way, sustainability can be taken into account and assessed in decision-making.

We therefore specifically seek investments that make a substantial and measurable[1] contribution and report on the positive impact of these investments every year. In addition to the financial returns, we calculate the impact of these investments and state how the BiOs have contributed towards the selected themes. [2] Further explanations of the calculation of impact are provided on our website.

  • 1 Our criterion is that companies must measure the impact or be willing to do this in the future. With this, we aim to stimulate industry to measure and report on impact.
  • 2 For the calculation of the social impact of investments, we are dependent on the impact data reported by companies. As a result, our impact calculations trail the portfolio reference date by one year.
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Measuring the impact of investments

The essence of BiO is that the impact of the investments in priority themes is measured in tangible units, such as the generation of clean energy in MWh, or energy efficiency improvements in tons of avoided CO2 emissions (these priority themes - food, health, water, climate and pollution - are largely consistent with SDGs 2, 3, 6, 7 and 12).

Although impact measurement is difficult, PGGM keeps to this for two reasons: (i) ‘impact’ is an improvement for people, society and/or the environment that must be measured in order to avoid impact investment from becoming lip service. The other reason (ii) is that we want to show the pension participants practical, positive results.

PGGM’s impact measurements are steadily improving, in both breadth and depth: the positive impact of (part of) more and more BIOs is being measured. The quality of impact measurement is also improving. In 2019, the models that convert the revenue from a certain solution (in euros) into impact (in e.g. tons of avoided CO2 emissions) are rounded off and documented. They have also been developed further for application to individual companies (rather than industrial groups). In some cases, the rough model outcomes already lead via engagement to more accurate impact reports by the companies themselves.

Nevertheless, there are still many methodological questions, including in relation to who exactly benefits (rich versus poor countries or groups), precisely how much difference is made (and in relation to what), how to measure negative impact as well as positive impact and how to avoid duplications in the value chain. In order to arrive at a uniform approach in these cases too, PGGM heads the SDG impact measurement working group in the Sustainable Financing Platform of De Nederlandsche Bank. This working group has about 25 members: asset managers, banks and companies. The ‘key indicators’ for positive impact that the working group has proposed are brought to the attention of organisations including the Global Reporting Initiative.

PGGM also has a seat on the advisory council of the Impact Management Project (IMP), which seeks to generate global consensus in more general terms around the different ways in which investors can have an impact. PGGM will continue to improve the revenue-to-impact models and the further standardisation of impact investment and impact measurement in 2020.

Challenges of Investments in Solutions

In the world around us there are social challenges that call for funding. The most important is perhaps energy transition. A major energy transition is necessary in order to halt climate change. Major investments are needed in order to bid farewell to fossil fuels and to make energy consumption more sustainable, more efficient and more financially attractive. On the instructions of clients, PGGM actively contributes to this by seeking investments that can play a role here. Investments in Solutions must make a sufficient contribution to both returns and impact in order to remain attractive to our clients. If we encounter such investment opportunities, we are keen to invest in these. A concrete example of this is the interest, announced in early 2019, in acquiring a long-term interest in the Eneco energy company via a joint venture with Shell. Unfortunately, this deal did not go ahead as we were outbid by a Japanese consortium. This shows once again what a challenge it is to find investments that comply with the risk-return characteristics we have agreed with our clients.

Frank Roeters van Lennep
Chief Investment Officer
Private Markets

Disappointment regarding missing out on the Eneco deal

Chief Investment Officer Private Markets Frank Roeters van Lennep: ‘It is disappointing to hear that we miss out on a deal on which an entire PGGM team worked hard for at least two years, in close collaboration with our partner Royal Dutch Shell. This was an effort of the Infrastructure team, together with colleagues from Risk, Legal and Corporate Communications, and we can be proud of what we achieved: an excellent offer, both in financial terms and with regard to the sustainable future of Eneco. The sale of Eneco would have been one of the rare possibilities to make a major investment in the Dutch energy infrastructure with Dutch pension capital. PGGM showed its best side in the process and during this we continually showed ourselves to be a committed long-term investor with sustainability in mind.’

What is an impact investment?

Although we aim for a positive and preferably additional social impact with our Investments in Solutions, our clients, and we as the administrator, have the primary task of providing for a good pension and, therefore, for goods returns for an acceptable risk. We cannot make any concessions on the financial results to be achieved for participants and therefore also cannot maximise a positive social impact at the expense of financial returns. We therefore want to have a positive social impact while retaining returns at commercial rates.

A major social need is not necessarily a good investment opportunity. At present, therefore, the efforts to define the impact of our clients’ investments have no influence on the strategic asset allocation: we do not steer for the scale of specific social results. However, measuring the tangible social impact does enable us to make clear where we have a positive impact and whether data are missing for the evaluation of this. We hope that when we do this, more investors will realise that these things are not mutually exclusive: we can realise commercial returns and have a positive social impact.

We can also give an important signal to the market when we move part of the assets to companies with an explicit social contribution. The reasoning is that good examples will be followed. In addition, there is what most ‘real’ impact investors lack and that we (the pension sector) do have: scale.

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Towards a more sustainable world: investing in the UN Sustainable Development Goals

APG and PGGM develop AI-powered platform for investing in the UN Sustainable Development Goals

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How we alligned the investments to the SDGs

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The United Nations launched its Sustainable Development Goals (SDG) in September 2015. These are 17 themes with concrete actions that are necessary in order to create a sustainable world in the years to 2030. In recent years, the SDGs have gained more ground and are used by companies and investors to report on their contributions to these global goals.

Although the SDGs appear to create a brand new rainbow landscape, PGGM is not a new player on the impact stage. Since 2014 we have been investing on behalf of our clients in solutions (BiO) for climate change and environmental pollution, water shortages, food uncertainty and health care issues. In such efforts, we not only investigate high-impact investment opportunities, but actively measure the concrete impact of our investment choices. On the basis of our experience with these investment themes, PGGM and APG have jointly developed a framework for the identification of products and services that contribute towards the UN SDGs. We call these Sustainable Development Investments (SDIs).

At the end of 2018, we had invested €38 billion in companies and projects that contribute towards the SDGs. This amounted to about 18% of the total assets under management. Our SDIs have increased by more than 2% in comparison with 2017. In addition to the increased acquisition of green bonds, our investments in real estate showed considerable growth in 2018. This is primarily thanks to the excellent performance in the Global Real Estate Sustainability Benchmark (GRESB). When real estate reached the top two quintiles of the GRESB, it is qualified as an SDI that contributes towards SDG 11 - Sustainable cities and communities.

It should be noted that the SDI framework could gradually evolve. Innovations and new perspectives relating to SDGs enhance the concept of impact. For example, we have seen various new structures in the fixed-interest market. The emphasis has shifted from green bonds to SDG bonds, which look beyond climate-related issues and are directed at broader social themes. In order to keep pace with such developments and at the same time, to coordinate the impact standards still more closely with our colleagues, PGGM and APG joined the Asset Owner Platform for Sustainable Development Investments (SDI-AOP). We are convinced that the Platform will strengthen our SDI efforts and give direction to the financial sector. Read more about the SDI-AOP.

Investments that contribute to the SDGs

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