PGGM increases ESG investment

NETHERLANDS - PGGM increased its environmental, social and governance (ESG) allocation by €1.1bn ($1.6bn) to €3.7bn in 2010, its Annual Responsible Investment Report shows.

The €105bn pension fund administrator conducted a survey of all its investment departments to determine which ESG factors have a financial impact on investments.

PGGM worked with Erasmus University Rotterdam to develop a methodology providing insight into the expected social effects of targeted ESG investments. The aim was to not only generate a financial return, but also add social value in areas such as local economic development, biodiversity and health, said the firm. The mandates grew in size from €2.6bn in 2009 to €3.7bn in the past year, it added.

In addition to the impact of ESG factors on the specific portfolios under management, PGGM investigated the effects of climate change and climate policy on the overall portfolio, with various scenarios drawn up to assess the economic effects of climate change on investments in various regions, sectors and investment categories.

Chief investment officer Jac Kragt said:"Responsible investment is immensely important to PGGM. It fits in with our identity as an asset manager for long-term investors and helps build a valuable society. We achieved success with our responsible investment for our clients in 2010 and are proud to have received recognition in the form of an international industry award for responsible investment."

PGGM's data comes on the heels of a report by Sweden's AP funds outlining its activities in socially responsible investing in 2010. The AP1, AP2, AP3 and AP4 are all members of the Ethical Council, which allows them to jointly carry out shareholder initiatives.

As of last year, the funds were in direct dialogue with ten companies around the globe including retailer Walmart and car-maker Toyota. The AP funds say Walmart has been accused of violating workers' rights by not allowing them to unionise, but the company has had "constructive dialogue" with the funds a provided proposals to improve workers' rights. Toyota has also been associated with anti-union activity, but the funds said the Ethical Council had "intensive, positive dialogue" with the company in London.

The Council's outside advisors are in active discussions with 100-200 other companies.

**Events: To hear more about ESG investing in Sweden, read about the Pension Fund Forum Sweden 2011