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Outlook

In 2019, major shifts took place in the working field of responsible investment. The signature of the IMVB covenant at the end of 2018, as well as the Climate Accord signed in 2019 and the European taxonomy for sustainable financing endorse this picture. This was driven by ambitious agendas at both the national and the international level, particularly in relation to the climate.

The developments show that the expectations relating to pension investors in the field of responsible investment are increasingly taking on a mandatory character. It also shows that in addition to the issues in the field of financial materiality, the social issues are playing (or will play) an increasingly emphatic role in the policy of pension funds and their administrators. This is consistent with the character of PGGM as a responsible investor with the aim of a habitable world. In recent years, PGGM has already taken explicit steps for the development of these issues and has played an active role in the realisation of the above initiatives. As a result, we can translate our insights and knowledge into concrete actions. We will continue this in the coming years. In the field of impact, we will continue to invest in the further development and refinement of measurement, with regard to both the financial added value of impact investments (we do this via the SASB framework) and the social added value in relation to the priority areas based on the sustainable development goals (SDGs). There is still a great deal of work to do in collaboration with the partners we have already been working with for some time in order to reach shared insights and realise an acceleration of the knowledge. The implementation will take shape on the basis of the insights already developed here and those still to be acquired, with the development of the IMVB covenant and further increasing the sustainability of the portfolio, in particular, requiring attention. By continuing to build on or setting standards in the interests of our clients, we ensure that we can continue to make a good contribution to the further anchoring of responsible investment in the investment portfolios and to making the results of this transparent.

European ambitions

The new European Commission has announced the ambition to make the EU the first climate-neutral continent in 2050. This political ambition creates an important framework for the future of the financial sector. 2019 already brought new rules relating to the transparency that financial parties must provide on how they deal with sustainability. More rules will be added in the coming years, aimed at increasing the number of sustainable investments. In addition, the EU itself will make extra investments in sustainable sectors. We will closely monitor which new regulations are developed and what the potential effects are of regulations and more government investments.

SDI Asset Owner Platform

Together with APG, PGGM is setting up the Asset Owner Platform for Sustainable Development Investments (SDI-AOP). The intention of the platform is to develop a standard method for the classification of investments and the extent to which these contribute to the Sustainable Development Goals (international goals) of the UN.

That contribution will be determined by the percentage of the revenue that companies realise from activities that the Platform sees as solutions for the SDGs. These include medicines for SDG3, Good Health and Wellbeing.

A special feature of this standard is that it is driven by large and progressive pension funds (carried out by their ‘internal’ asset managers such as APG and PGGM). The expectation is that this will give direction to the entire investment chain, including other pension funds, asset managers and providers of SDG impact data.

Another special feature of the Asset Owner Platform is that a growing proportion of the impact data are acquired by means of artificial intelligence (AI). This increases the efficiency and transparency of the data gathering.

The Asset Owner Platform will formally start in 2020 with PGGM as a member of the Design Authority and a buyer of comparable SDG impact data for the entire portfolio.

For PGGM, the determination of the SDI revenue is necessary but not enough for what we really want to know: the actual difference that our investments make for people, society and the environment. For reasons of data availability, this is difficult, but ultimately, we also want to measure the results of the investments with the SDI-AOP. A standard methodology for this would be a very important step forward in raising investments that combine a demonstrable impact with a commercial financial return.