PGGM is one of the largest pension fund managers in Netherlands, managing the pension assets of various Dutch pension funds. It is a leading advocate and practitioner of responsible investment by integrating environmental, social and governance (ESG) factors into its investment process. PGGM currently manages over $250 billion pension assets globally.
Adopting comprehensive ESG integration framework
PGGM has developed its own ESG framework consisting of various responsible investment strategies, including ESG integration, engagement, voting, exclusions and impact investing. It applies the framework across different asset classes such as listed equities, fixed income, private equity, infrastructure, etc. The framework enables PGGM to identify and manage ESG risks and opportunities.
Excluding investments based on norms and values
PGGM maintains an exclusion list of companies and countries that violate certain environmental and social norms aligned with its values. For example, it divested from oil companies operating in Sudan due to human rights concerns. It also excludes tobacco, alcohol, gambling and arms manufacturers on ethical grounds.
Engaging with investee companies on ESG issues
PGGM actively engages with its portfolio companies through direct dialogue, shareholder proposals and proxy voting to influence their ESG policies and practices. It pushes companies to improve workplace conditions, reduce emissions, enhance transparency, etc. to improve sustainability.
Incorporating ESG factors in investment analysis
PGGM’s investment team incorporates relevant ESG data into financial analysis to identify material risks and opportunities. It looks at metrics related to GHG emissions, water usage, labor issues, litigation risks, governance practices etc. Its portfolio managers are incentivized based on ESG performance.
Investing in solutions to sustainability challenges
A portion of PGGM’s portfolio is allocated specifically towards investments that contribute solutions to issues like climate change, food security, health access etc. aligned with UN Sustainable Development Goals. For example, it has invested in sustainable forestry, renewable energy, microfinance and affordable housing projects.
In conclusion, PGGM exemplifies how large institutional investors like pension funds can adopt comprehensive responsible investment practices aligning financial objectives with positive societal outcomes.