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A peek into the practice

We have the in-house-expertise to invest our clients’ assets in line with their wishes. In doing this, we work with leading managers worldwide and also have our own investment teams. These internal investment teams help to keep our total costs low and ensure tighter control of how mandates are carried out. The investment teams also screen the investments for relevant ESG factors. In this they are supported by the Responsible Investment team. In order to give an impression of these investment teams, we highlight a few of them below.

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Our infrastructure team invests in ‘real assets’ for our clients. These include investments in energy, roads and bridges, for instance.


The team behind the infrastructure portfolio follows a direct investment strategy. The strategy is focused on building a large, diversified portfolio in a manageable, comprehensible and controllable manner. In doing so, the team endeavours to keep costs as low as possible and strives for stable long-term income. Over the past few years investments in the sustainable energy sector and water sector have also been added to the portfolio as part of this strategy.

The continuous pursuit of efficient business operations is one of our main goals. Infrastructure put this into practice in 2019 among other ways by expanding the functionality of new software. This ensures they are now better supported in analysis and decision making. Not only on the level of individual investments, but increasingly on the level of the entire portfolio as well. This contributes to the service towards our clients.

ESG risks

ESG factors play an important role in the investment processes for the infrastructure team. That is why PGGM Vermogensbeheer is one of the founders of GRESB Infrastructure, an organisation that provides a sustainability benchmark for individual infrastructure investments and for infrastructure fund managers.

Globalvia - an investment of the PGGM Infrastructure Fund - achieved first place in the GRESB Infrastructure benchmark. Globalvia has an active ESG policy in the management of its concessions. The company adheres to ESG principles for the countries in which it operates and on the local level it provides lesson programmes at schools to improve safety on and around roads. For the railway concession, Globalvia managed to reduce its CO2 emissions by more than 95% since 2015 by switching to clean energy for its electricity consumption. This represents a reduction of 3,180 tonnes of CO2.

With this Globalvia demonstrates that it is able to contribute to the sustainability objectives within the return requirements of the PGGM Infrastructure Fund as shareholder. This evidences a number of qualities - the ability to select the right strategy, strong financial management and ambitious actions to make business operations more sustainable - which make Globalvia such an attractive investment.


The infrastructure team hopes the investments will contribute to solutions for societal problems. In 2019, for instance, Infrastructure’s portfolio contributes to solutions in relation to water and climate. In 2019 the PGGM Infrastructure Fund invested a sum of USD 601 million in SUEZ Water Resources, a subsidiary of listed company SUEZ. It provides over 2 million people with drinking water in the states of New Jersey, New York, Idaho, Pennsylvania, Delaware and Rhode Island, making it one of the largest private water companies in the US. The PGGM-EDF Renewables portfolio was also expanded by over USD 120 million in 2019. This portfolio contributes to climate solutions and consists of wind farms and solar energy parks in the United States.

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Private Real Estate

Real estate is extremely capital intensive and PGGM has the scale and expertise to invest in this sector. This provides our clients and their participants with access to return that would otherwise be impossible. This return consists of dividend and the increase in the value of buildings. By collectively investing in private real estate, the team behind Private Real Estate spreads the risk across different types of buildings, such as offices, homes or shops. We also minimise the costs, such as management costs and tax.


A number of reviews in 2019 showed that the team behind Private Real Estate (PRE) was considered ‘best in class’. This is excellent recognition which inspires pride in the team, as acknowledgement of a lot of hard work. A number of initiatives were launched to further streamline business operations and thus implement PGGM strategy. A good analysis of the portfolio is an essential part of the investment strategy.

We are internationally known as a reliable investor who also has an eye for the ESG factors of real estate.

Sebastiaan Blom
Junior Invesment Manager Private Real Estate

The implementation of eFront in Private Real Estate in 2019 further fleshed out the realisation of a robust and scalable system landscape. PRE also invests time and energy in ‘Business Intelligence’ (BI) to translate large volumes of available data into valuable information. The realisation that the future belongs to data-driven organisations is becoming more widely recognised and investments in collecting, analysing and sharing data are increasing at PGGM. Private Real Estate was closely involved in setting up a new data management platform, for instance.

ESG risks

PRE regards climate change as a financial risk. A distinction is made here between the physical risk of climate change and the transition risk. PRE has charted out the physical risk of climate change for its global real estate portfolio. This was the result of a cooperation with German re-insurer Munich Re. PRE was also involved in an initiative to gain insight into the transition risk that climate change poses for global real estate portfolios. This initiative was a continuation of the European CRREM project (Carbon Risk Real Estate Monitor), aimed at identifying the ‘stranding risk’ for real estate and developing ‘decarbonisation pathways’.

Over the course of 2019, the PGGM PRE team worked closely with Munich Re, one of the largest re-insurance companies, where charting out climate risk has been part of its central operations for decades. What was special about the analysis performed was the level of detail, whereby the exact XY coordinates of the almost 4,000 buildings in which the PGGM Private Real Estate Fund has invested were used. The results of this analysis will be analysed further and as such constitute part of the portfolio optimisation decisions. In the next several years, this analysis will be updated periodically due to purchases/sales in the portfolio and further development of the model at Munich Re, based on new and permanently uncertain climate models.

In addition to an analysis of the physical climate risk, the PGGM PRE team started up a project to better visualise the transition risk. This means that all buildings worldwide will be screened to determine whether they can continue to satisfy regulations for CO2 emissions and building efficiency in the coming years. This initiative is a continuation of the European CRREM project, whereby pathways for countries outside the European Union are now being determined as well. For this specific project, the PRE team is using the data supplied each year by Global Real Estate Sustainability Benchmark (GRESB) participants. GRESB compares, measures and scores real estate investments worldwide in terms of sustainability. A few of the individual components analysed by PRE are the energy consumption and greenhouse gas emissions of the buildings in which the PGGM Private Real Estate Fund invests. Charting out these values, in combination with monitoring new legislation and regulations on greenhouse gas emissions, will ultimately result in improved insight into the transition risk.

Good result during the annual GRESB survey

In 2019, the PGGM Private Real Estate Fund (PREF) once again achieved excellent results in the GRESB survey 2019. The score for the total portfolio rose significantly, further outperforming the global GRESB average and the relevant benchmark for non-listed real estate. This is the result of improvements in both policy and implementation. 95% of the funds currently has ‘Green Star’ status and 35% even has the highest possible score of 5 stars. As such, these funds are among the 20% of best-scoring GRESB participants and are shown in figure 1 as green circles. There are also four funds within PREF which can call themselves worldwide sector leaders and eight funds that are sector leaders in the region. The total portfolio received a 4-star rating. The development of the score for PREF over the past several years can be seen in figure 2 below.

Figure 1 ♦ PREF GRESB scores 2019 / Source: GRESB and PGGM

Figure 2 ♦ Development in PREF GRESB scores 2012-2019/ Source: GRESB and PGGM


An important component of our engagement in relation to ESG is based on the annual GRESB (Global Real Estate Sustainability Benchmark) ratings. GRESB enables us to compare the scores of participating funds on various ESG aspects with those of other equivalent funds. PREF requires all its managers to participate in the GRESB survey. The PREF investment team uses these results to start a dialogue on sustainability with the management of the companies and funds which are invested in. In this way, efforts are made towards further progress in investments in the area of sustainability. Not only the policy and transparency are important in this context, but also the implementation, and the measurement and reduction of energy consumption, CO2 emissions, water consumption and waste. Based on the results, an in-depth analysis of the entire portfolio and of each individual fund ensues. This analysis looks beyond the total score by zooming in on the individual components underlying this score. These scores can then be compared to the relevant benchmark. The GRESB analysis thus constitutes the basis for engagement with the various managers in order to further improve the ESG profile of the entire real estate portfolio each year.

In consultation with APG and MN, PGGM decided to classify the positive contribution of real estate investments in relation to sustainability as Sustainable Development Goal (SDG) 11. PRE Fund (PREF) investments with a GRESB score in the top two quintiles (quintiles 4 and 5) are classified as SDI (Sustainable Development Investments). These investments are characterised by good sustainability policy and positive results in terms of energy consumption, CO2 emissions, water consumption and waste management. Other investments can be eligible for an SDI classification if accessible and/or affordable housing, student and/or senior housing or health care-related real estate is invested in. The number of PREF investments classified as SDI in 2018 was 38, 30 of which qualified based on their GRESB score. Nine new investments were added to the list with respect to the previous year. This puts the total PGGM PREF SDI volume at almost €8 billion, an increase of over 20% compared to the previous year.

PRE is therefore actively involved in a number of sustainability initiatives such as GRESB and the CRREM project. The cooperation with Munich Re also made it possible to chart out the physical risk of climate change for our global real estate portfolio.

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Private Equity

ESG in Private Equity: getting managers committed

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The Private Equity team invests our clients’ money in non-listed companies. The management costs of this asset class are generally higher than that of other asset classes. The returns are also higher, however.

PGGM Private Equity’s ambition is to achieve attractive returns in a diversified portfolio. This portfolio should exceed the public benchmark by 2.5% in the long term, which has actually taken place historically. The portfolio’s 10-year average return is presently >15%.

PGGM Private Equity invests in funds, co-investments and secondaries in the Mid-Market and Large Buy-out segment, spread mainly over the developed European and American market, but also the rest of the world. The PE Team attempts to identify the best possible funds and investments in order to add these to the portfolio. We currently have relationships with >70 general partners and we have invested in 100+ funds, 10+ secondaries and 50+ co-investments, spread across Europe (35%), America (46%) and the rest of the world (19%).

Alongside the ambition outlined, responsible investment is also a priority. We manage the Private Equity portfolio of our clients, while also taking into account our impact on the world around us. We recognise that Environmental, Social & Governance (ESG) factors have a material impact on our portfolio’s performance. On the one hand it offers possibilities for identifying investment opportunities in that area, but the corresponding risks must also be discovered and mitigated.

We monitor our portfolio closely for, among other things, the performance of the investments made. A close eye is also kept on other important issues that could have an impact on our portfolio, of course. We require ESG reporting from our General Partners, for instance, allowing us to also keep the underlying companies in scope. If necessary, action is taken to push for improvements.

ESG investments also offer opportunities, naturally. This is why a separate team was set up in 2019 to specifically focus, within the PGGM PE Team, on making investments that can be qualified as ‘Investing in Solutions’. The team has been allocated 500 million euros over the coming five years, solely for making ESG-related investments that would otherwise have fallen outside our field of view.

Investments in Solutions: National Seating & Mobility
In 2019 the Private Equity team launched a new initiative to find investment opportunities within the BiO topics of climate change, water scarcity, food security and health care. The aim is to invest in companies that contribute positively to solutions in these topics. The company National Seating & Mobility (NSM) is one of these companies in which the Private Equity team has invested (€22 million) and expects to generate an impact in the topic of health care. NSM is a leading provider of complex rehabilitation technologies and accessibility solutions. The company operates in the Canadian and US market, where it is active in 46 of the 50 states. NSM focuses on custom manual and power wheelchairs that improve patients’ mobility and day-to-day functioning. The company helps people with mobility-related limitations regain their independence. NSM provides a solution for people of all ages who suffer from a disease, like ALS or MS for instance, or who have lost mobility through other circumstances. The investment contributes to improving patients’ quality of life and mental health.

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Long Term Equity Strategies

Long Term Equity Strategies (LTES) is the PGGM department that manages the internal portion of the Investing in Solutions via liquid Equities (BOA) mandate. The BOA mandate is a portfolio of listed equities that contribute to solutions for climate change, water scarcity, food security and access to health care.

In 2019, the portfolio return was 30.9%, 0.25% below that of the BOA benchmark.


In 2019, the LTES team was assessed by independent external consultant Willis Towers Watson (WTW). WTW determined that the team implements its primary financial objective properly. The investment process has been well designed and the in-depth financial analyses contribute to a well-founded concentrated investment portfolio.

ESG risks

As far as ESG is concerned, LTES focuses mainly on factors that pose a significant risk to PGGM and its clients. This could include child labour or other forms of exploitation, for instance. We are convinced that avoiding these kinds of ESG risks not only results in a better world, but also yields a better financial return in the long term. That is why ESG integration is important for LTES.

The BOA investment universe has been put together based on impact criteria. That means that the universe could include businesses whose ESG risks do not weigh up against the impact. It is therefore part of the assignment to screen businesses for ESG risks as part of the equities selection process. The ESG analysis includes an assessment of the existing ESG policy, the reporting and management system, along with research using independent external sources on the

company’s ESG performance. LTES uses external data sources for this, such as the Internet, annual reports and specialist databases like Sustainalytics B.V. and MSCI ESG Manager. LTES also explicitly examines the outstanding controversies relating to every business. LTES furthermore engages in dialogue with the management of the companies in which we invest. The ultimate result of the ESG analysis constitutes an integral part of the investment case.


The BOA mandate invests exclusively in listed companies with sufficient impact in the four topics that PFZW and PGGM have identified: climate change, food security, water scarcity and health care. A transition to objectives in terms of the UN’s SDGs is currently being prepared. An in-depth ESG risk assessment is performed on the companies in the portfolio, which partly determines the topics for discussion with the management of these companies.

The LTES team is a pioneer in the area of impact investing. It has been active since 2015 in measuring and calculating the external impact of the products and services provided by the listed companies. The team discusses this with the companies and works towards improved reporting on this by the companies themselves. LTES had extensive contact with companies in 2019. LTES also made a start in 2019 on modelling the impact per topic. We hope this can help estimate the impact of companies who do not report on this themselves and create an objective measure of comparison for the companies that do indeed report on impact.

Listed companies that take up their social responsibility

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Systematic Equity Strategies

Systematic Equity Strategies (SES) is the department that manages the PGGM Developed Markets Alternative Equity (DMAE). This is a quantitatively determined portfolio with exposure to a certain series of financial factors (such as value, low volatility, quality and size).

In 2019, the return of the DMAE Fund was 2.47% below that of the benchmark, the FTSE Developed Index, which increased by over 30%.


In 2019, the team completed the preparations for the integration of a risk model and a transaction costs model. Both will be put into use in 2020. These are important steps in improving the process and in the direction of setting up the mandate to be best in class, in accordance with the recommendations of internal and external advisers.

ESG risks

The main goal of the SES mandate is to achieve a satisfactory risk-weighted financial return during the expected life of the investment. The SES team also researches ESG factors in relation to their potential value for the investment portfolio. The team made good progress in 2019 on their research into ESG integration. Data from five providers was used for a comparative study into the effects of ESG factors on risk and return, for instance. The outcomes of this research can be used to take further steps in improving the ESG profile of the portfolio without adverse, or perhaps even with positive effects, particularly on the risk.


PGGM wants to combat climate change by halving the CO2 emissions of the equities portfolio. Thanks to an optimal weighing of CO2 intensity and factor scores, in 2019 the DMAE Fund once again remained within the CO2 reduction targets set.

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Investment Grade Credits

The Investment Grade Credits team invests in euro-denominated corporate bonds with a high credit rating for our clients. The goal is to achieve a net return over the credit cycle at least equal to the benchmark. The strategy is based on bottom-up credit selection in which relatively small active positions are taken in order to make up the fund’s management costs. This is used to put together a portfolio comparable to the benchmark. Thanks in part to a turnaround in the ECB policy, last year (2019) was very positive for corporate bonds. Our benchmark achieved a return of 6.25%, the fund achieved a return (after costs) of 6.46%.

ESG risks

Bond investors mainly look at the downside of an investment. In the best case, the investor will get the principal back with the coupon interest, while in the worst case the entire principal could be lost. Our goal is therefore to identify weaker companies early on. Corporate bond investors take ESG factors into account in their analyses by nature. A solid governance structure is essential for managing a business well and environmental risks can also have major financial consequences. We firmly believe that ESG factors affect the downward risk. That is why ESG factors are an important part of the business analysis.


The bond market has undergone many developments in terms of ESG over the past several years. There is a growing number of issuers issuing green bonds, for instance. Green bonds are bonds whose proceeds can only be used for sustainable projects. Just over 200 billion euros in green bonds were issued in 2019 in total (an increase of 35% compared to 2018). Green bonds were initially mainly issued by banks and utility companies, now there are an increasing number of businesses from other sectors embracing this form of financing, however.

Many new initiatives were launched last year in addition to green bonds. Different types of bonds, such as SDG-linked bonds, Climate Action bonds and Circular Economy bonds, were issued. Italian utility company Enel issued the first SDG-linked bond in 2019. The coupon on this bond is linked to the attainment of a number of objectives based on the United Nations Sustainable Development Goals. This bond met with very mixed responses in the financial market. There were vocal proponents and opponents to the bond. Proponents applauded the initiative because it would give the company a financial incentive to achieve the objective. Opponents on the other hand disapproved because bond holders would now be rewarded if the company failed to achieve the objectives. We are one of the proponents of the construction and consider it positive that a company commits to ambitious objectives linked to the SDGs. We therefore participated in this new transaction.

A total of 950 million euros in the fund is now invested in companies that contribute to a better world, so-called BiO investments. This represents approximately 20% of the total fund. At least once a year we try to have talks with every company in which we invest. During these talks, we discuss both regular developments and ESG developments in the business. We also engage on specific ESG topics with businesses where we want to see fundamental progress, such as Volkswagen, for instance. We see that more and more parties are transparent in their reporting on their ESG objectives and activities. There is also a growing number of parties that provide detailed impact analyses of their activities. We expect that this trend will continue and that an increasing number of companies will measure and report on their impact in the future, making this an even more important factor in the business analysis.

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Client Portfolio Analysis and Management

The CPAM department is part of Fiduciary Management and functions in this context as first-line risk manager for the total portfolio. The Client Portfolio Management team (CPM) coordinates the total portfolio and proactively informs clients about important developments in the portfolio in relation to signals from the environment picked up by the Economic and Financial Markets Research team (EFMR).

Environment: The Economic and Financial Markets Research team

Financial markets are interconnected and changes in these markets can affect the entire portfolio, without distinguishing between asset classes and mandates. That is why it necessary for a central research capacity to support the PGGM organisation in detecting and classifying signals from the environment in order to assess these for potential impact on client portfolios. The Economic and Financial Markets Research team conducts research into the macroeconomic environment and financial markets. The team prepares PGGM’s company view in relation to macroeconomic expectations, country risks and the valuations of asset classes. In addition to periodic research reports like the Environment Monitor and country risk analyses, the team carries out thematic studies that anticipate current events in the economy and financial markets.

Portfolio: The Client Portfolio Management team

Daily monitoring and coordination of clients’ total portfolios is essential for the fiduciary management task. Being able to adjust course and intervene based on an overview of the total portfolio and having insight into cross-links is important in this context. It is also important to maintain good insight into the sum total of all the different mandates of our clients.

What (desired or undesired) tilt, concentrations and (factor) exposure does this create on the total level? What anticipatory measures should we take in the rebalancing of the expected cash flows to minimise costs and to reap a rebalancing premium?

We must be able to answer these questions if we are to be demonstrably in control. It is important to centralise coordination of the total portfolio. Internally at CPM, close to the execution.

In concrete terms at PGGM, managing the client portfolio means:

  • Having insight into relevant total exposures, risk and return factors that influence PFZW’s total portfolio.

  • Allocation management at the total portfolio level, including rebalancing. CPM also proactively communicates to clients about the rebalancing.

  • Having insight into the underlying investments in the portfolio.

  • Managing investments that no longer fit within our clients’ strategic allocation (based on a philosophy of phasing out with tact and opportunity costs in relation to alternative risks and return in the total portfolio).

By functioning as the central contact for this, CPM enables clients to constantly monitor the total portfolio.

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External Management

Within PGGM, the External Management department is responsible for the selection and monitoring of public markets portfolios, including Listed Real Estate and excluding the Interest Rate Hedging Mandate, the Overlay mandates, the PGGM Government Bond Fund and mortgages mandate. 32 external portfolios are managed and eight internal portfolios are monitored with total assets of EUR 123.75 billion.


External (in billion €)

Internal (in billion €)

Developed markets equities



Developed markets alternative equities



Emerging markets equities



Investing in Solutions Equities



Listed real estate



Corporate bonds developed markets



High Yield



Corporate bonds and high yield emerging markets



Emerging Markets debt






Phase out (Hedge Funds)






Emerging Markets Debt Passive Plus

PGGM has been investing in Emerging Markets for many years, both in equities and in fixed-income securities. In the latter category, allocation takes place to, among other things, Emerging Markets government bonds in local currency: the Emerging Markets Debt Local Currency assignment (EMD LC). In this case, an emerging country borrows in its own local currency. The investors in these government loans receive the interest and the investment back in the local currency as well. The risk is that we may not get our money back (credit risk) or that we may get it back but in a currency that has depreciated significantly (currency risk). If the local currency appreciates against the euro, for instance, the value of the government bonds, translated to euros, will increase, however. Because it was initially a relatively new asset class for our clients, a passive implementation was first opted for. Over the past several years this market has developed into a fully-fledged market and PGGM has amassed a great deal of experience in it. After an evaluation of the passive execution of the EMD LC assignment, a start was made in 2019 on expanding the investment restrictions so that managers could make better use of market inefficiencies that regularly occur in the EMD LC market. Thus the Emerging Markets Debt Passive Plus transition was realised.

ESG integration in External Management

Following the equities markets, there is growing realisation in both the High Yield (HY) and Investment Grade Credits (IG) markets of the added value of environmental, social and governance (ESG) integration in the day-to-day investment processes of managers. Especially the attention to environmental and social aspects has become more significant over the past few years. Responsible governance has always been considered an important component in credit analysis. For all managers selected by PGGM, ESG is integrated in the investment process and PGGM’s manager selection team supervises the maintenance and progress of this. We see better awareness and progress at all PGGM HY and IG managers. We see that one of the PGGM HY managers, for instance, Columbia Threadneedle, clearly occupies a leading role in the HY market. An important factor in the progress and speed at which Columbia Threadneedle further developed ESG in its business is the (expressed) management conviction, accompanied by substantial investments in IT (to combine data). These data are essential to gain better insight into the various business drivers and their future-readiness in the energy transition, for instance. These insights then result in internal scores as input for the overall credit score and the ultimate portfolio composition. The managers also have the latitude to invest in green bonds, which have become an institutionalised product.

CO2-optimised benchmark transition realised

‘Halving the portfolio’s negative footprint’ was one of the initiatives from the 2020 Investment Policy stemming from the Investment Framework of our largest client, PFZW. Companies with high CO2 emissions have therefore been sold and the money has been reinvested sector-neutrally in companies with relatively limited CO2 emissions. The existing risk-return profile has been maintained. This implements the conviction that a sustainable, liveable world can generate adequate return in the long term.

Global Diversity Initiative

Legal & General Investment Management (LGIM) has taken a trailblazing role in a broad coalition with a total of $2.5 trillion in assets under management (AUM), in which PGGM also actively participates. The goal is to promote the diversity of companies in the S&P500. So a constructive dialogue with the companies from the S&P500 was started. In this context, the coalition mainly focused on the following four points: disclosure, improvements, hiring policy procedures and inclusiveness in the composition of the board. One of the successes has been that 51 of the 72 companies have appointed at least 1 woman to the board.

Engagement in relation to impact

The Investing in Solutions via Listed Equities mandate went live in 2015. Further on in this report you can read more about how we realise good financial returns via Investing in Solutions and at the same time have a tangible impact on creating a sustainable world. From the start, via this avenue the allocation has been steered to companies whose products and services contribute to solutions for the topics of climate, health care, water scarcity and food security. Both departments performing this mandate (PGGM Equities and UBS Asset Management) are increasingly pressing home the impact ambition through targeted engagement with companies in the portfolio. After a company’s standing in relation to awareness and measuring the impact of its products and services has been assessed, engagement objectives are formulated for each company. We hope this helps achieve better and more uniform reporting on the impact realised and that where possible, impact objectives are given a more integral place in the business operations. As part of the engagement process, the progress on this point is monitored and the company is advised on this.

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