Ethical Performance
inside intelligence for responsible business


managing risk across a range of asset classes

September 2007

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.


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