NETHERLANDS – The €329bn pension manager APG says good staff policy, efficient water management and climate change will be important themes in its dialogue with companies in 2013.

It will also increase its focus on fraud and corruption, as well as on boards' knowledge of subsidiary company activities, according to its annual responsible investment report for 2012.

APG has also developed an environmental, social and governance (ESG) dashboard and a monitor for country risks, allowing portfolio managers to better factor in ESG risks into the value of companies. 

It says ESG factors will be further integrated other asset classes, and has started investigating hidden risks –  yet to be priced into the value of a company – to benefit quantitative strategies.

Thijs Steger, spokesman for APG said: "We will be looking at, for example, weak corporate governance structures, susceptibility for corruption and weaknesses in strategic staff policy."

The manager's focus will be on private equity as well as on developing a new assessment framework for infrastructure, it said.

APG – the manager for the €292bn ABP civil service fund – further indicated it would encourage property companies to improve transparency on ESG performance via the Global Real Estate Sustainability Benchmark.

In addition, APG has excluded 16 companies from investments, largely because they manufacture cluster weapons.

The exclusions also include PetroChina for failing to take precautions against involvement in human rights violations, as well as the US retailer Wal-Mart for its anti-union stance.

Last year, the manager suspended investments in countries subject to a UN-sanctioned arms embargo.

APG is a board member of the European Institutional Investors Group on Climate Change, reflecting its concern about the effect of climate change on its long-term interests.

Its ESG report indicated it was a party in 230 class actions against US firms for damages caused by misconduct.

It was further in discussions with 200 companies, mostly aimed at governance, environmental and management issues.

The companies include Apple, concerning labour conditions at suppliers in China, US company Netapp about the sale of electronic spyware to Syria, as well as energy giant BP about its safety culture, it said.

After visiting disputed forestry projects in Mozambique, APG made clear it had ascertained that sufficient improvements have been made, following a local management change.

Steger stressed that the ESG approach helped APG reach better investment decisions, but that it was very difficult to translate the results into concrete figures in shape of increased returns.