PGGM, one of the biggest pension funds in Europe, applies both
exclusionary and engagement policies to its huge portfolio of equities
and other investments in an effort to minimize social and environmental risk. Marcel Jeucken talks to Mike Scott
For Dutch pension fund PGGM, responsible investment is big business. On
behalf of two million members, the company manages more than €85billion
($115bn, £57bn) of assets, all of it subject to its responsible
investment policy introduced in 1985 and overhauled last year.
There are two major reasons for the policy, according to Marcel
Jeucken, the fund’s head of responsible investment. ‘First, it is our
fiduciary duty to produce high and stable returns and environmental,
social and governance issues affect returns. Second, we provide
pensions for the health sector, so responsible investment reflects our
identity and our stakeholders.’
However, as Jeucken explains, PGGM’s approach is different from that of
an SRI fund that might hold 40–50 stocks. To generate returns and
maintain stability, the fund has to have a diversified portfolio – it
holds 4000 stocks worldwide. These comprise 42 per cent of its
portfolio, with another 25 per cent in fixed income, 13 per cent in
real estate and the rest held in four specialist asset classes, among
them commodities and private equity. All have different requirements to
take into account when implementing the investment policy.
As a result, the fund operates a range of policies to determine what
assets to hold. In terms of exclusions, PGGM focuses on weapons and
human rights, now applying this policy in all asset classes. There are
some stocks in which it does not invest, such as companies involved in
weapons of mass destruction. But there are others ‘where we have issues
with a company but don’t want to exclude them – in those circumstances
we would engage with the company,’ Jeucken says. If, for example,
violations of human rights have happened within a company’s sphere of
influence, ‘PGGM will enter into a dialogue with the company and will
seek to establish, for example, a satisfactory human rights policy
and/or programmes so as to avoid any such violations in the future.’
The engagement policy is also focused on corporate governance, climate
change, healthcare and medicine. Later this year, the fund is set to
publish a list of the companies it has excluded, still a rare move
among pension funds.
With such a wide range of investments, co-operation is vital. While it
does some engaging internally, F&C is also retained to do
engagement work and specialist research bodies supplement the efforts
of PGGM’s five-strong in-house team.
The fund is signed up to various initiatives that allow it to exert
greater influence as part of a group of investors, including the UN
Principles for Responsible Investment, of which it was one of the
founder members. It is also a signatory to the Carbon Disclosure
Project and the Extractive Industries Transparency Initiative.
Despite the many guidelines, investment managers still have scope to be
creative, Jeucken says. ‘We want them to be positive in investments
that have a beneficial impact on society. We recently launched a
€500million clean-tech private equity mandate with [fellow Dutch
pension fund] ABP.
‘We believe responsible investments is here to stay. It is gaining momentum all the time,’ Jeucken concludes.
