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What we mean by responsible investment

PGGM and responsible investment

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Responsible investment has already been an important principle in the determination of the investment policy for many years. This concerns both good and responsible returns. For PGGM and its clients, responsible investment means consciously taking account of the influence of the environment, social factors and good corporate governance (ESG factors) in all investment activities. By agreement with our clients, seven specific focus areas were chosen:

Through our activities in the field of responsible investment, we provide for responsible, stable and good investment results that are consistent with our clients’ pension ambitions. These activities are founded on the beliefs that (1) responsible investment pays off by producing a positive risk-return profile; (2) sustainable development results in good and stable returns over the long term; and (3) capital is a driving force of sustainable development.

We use six instruments for the execution of responsible investment activities. We apply these instruments for the purpose of (1) promoting social solutions, (2) encouraging companies to make sustainability improvements, and (3) excluding companies that carry out activities that we do not want to support.

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What we want to stimulate

Investments in Solutions

Investments in solutions for social development (BiOs) are clearly defined investments which not only contribute financially to the returns, but are also intended to generate added social value. We invest in solutions for climate change, water scarcity, food security and health care. Our client PFZW has set us the goal of quadrupling the investments with a positive impact by 2020. This means that in 2020, we want to have invested as much as €20 billion in social solutions. We measure the impact we have on the world via these investments.

Investments in the SDGs

The BiO themes are reflected in the Sustainable Development Goals (SDGs) created by the United Nations (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. We will invest more in the SDGs in the future. To that end, we have measured all investments in the SDGs since 2018. We call these Sustainable Development Investments (SDIs).

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What we want to improve

ESG Integration

The environment, social aspects and the quality of corporate governance can affect our clients’ return on investment. Conversely, the companies and agencies in which we invest can have an impact on the world around them. We therefore firmly believe that taking account of ESG factors in the investment processes contributes to good risk management and can ensure that achieving financial returns is coupled with sustainable social improvements.

Our client PFZW has set us the goal of halving the CO2 emissions caused by the investments in the portfolio by 2020. By selling shares of the most pollutant companies in the most pollutant sectors (energy, materials and utility companies), we reduce the CO2 emissions of the investment portfolio. We open talks with the companies of which we sell shares and ask them to reduce CO2 emissions.

On the basis of the following three ‘active ownership’ activities, we fulfil the rights and responsibilities associated with being a shareholder in listed companies:

Voting

Voting is one of the most important rights a shareholder has. We therefore vote on the basis of our own judgement at shareholder meetings. Consequently, we contribute to good corporate governance. For each company, we publish its voting record on a special website.

Engagement

As a pension fund service provider we see it as our responsibility to engage with market participants and companies about their policies and activities. This way we attempt to achieve ESG-related improvements.

Legal proceedings

When necessary, we institute legal proceedings against companies on behalf of our clients as shareholder to recover investment losses and enforce good corporate conduct.

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What we do not want

Exclusions

We want to avoid making investments that are deemed unacceptable to us or our clients. This is why we do not invest in controversial weapons or tobacco. Furthermore, we can exclude investments in companies and countries (government bonds) that violate human rights or that cause serious environmental damage, for example. In such instances, we first attempt to realise improvements by engaging in a dialogue with the company. If that fails, we can proceed with exclusion.

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