NETHERLANDS - The €105bn asset manager PGGM has increased its socially responsible investment (SRI) by €1.1bn to €3.7bn and has continued incorporating ESG factors into its overall investment policy in 2010.
During the presentation of its annual report on responsible investment, Jac Kragt, chief investment officer, said: "Given the progress we have made so far, we are world leaders on ESG policy, and that is what we'd like to be. Responsible investment also contributes to the financial result."
Kragt said PGGM last year provided an insight into the financial impact of ESG factors on investments to its 100 investment staff, 10 of whom are specifically tasked with responsible investment.
"It must become part of their genes that, for example, by involving the local population in infrastructure projects, we can avoid delaying court cases and won't miss out on proceeds," he said.
"And by demanding that property managers improve the energy consumption of empty buildings, the market value of our real estate will rise."
The CIO stressed that PGGM wanted not only to generate financial returns, but also add social value - such as on local economic development, biodiversity and health - through ESG policy.
The asset manager also mapped out the potential economic impact of climate change on asset classes, investment sectors and areas.
Marcel Jeucken, head of responsible investment, said PGGM was anticipating more stringent rules for a climate-neutral future following the international climate agreement.
"These rules will have an impact on all asset classes," he said.
PGGM also said it has developed, together with Rotterdam's Erasmus University, a method of providing insight into the expected social impact of ESG investments.
For 2011, the asset manager has planned to factor in the expected social returns into the entire investment portfolio, Jeucken said.
In addition, it also wants to map out the ESG risks posed by listed companies and raise ESG awareness at the chain of brokers, custodians, external asset managers and private equity houses.
At present, the asset manager is applying at least one of its ESG criteria to 98% of its investments, according to Jeucken.
So far, 38 companies - representing 1.2% of invested assets - have been excluded from PGGM investments, as they failed to meet its ESG criteria or follow its engagement process.
Jeucken said PGGM's purpose-made responsible investments were mainly in alternative energy, such as wind power, but also in recycling and water treatment.
PGGM is asset manager and pension provider for the €100bn healthcare scheme Pensioenfonds Zorg en Welzijn (PFZW).