Dutch pension fund manager PGGM is to develop its ESG integration by expanding its expert “veto” policy into all asset class investments.
The €178bn asset manager currently operates a policy where ESG-dedicated investment staff sit on investment committees with the right to veto transactions that do not meet set standards.
Eloy Lindeijer, CIO at PGGM, said this policy allowed the manager to incorporate ESG and responsible investment decisions at the core of its business.
However, the manager is now looking to expand this policy and have responsible investment staff sitting in all asset class departments.
Speaking at the World Pension Summit in The Hague, Lindeijer described the policy as a “powerful change”.
“[ESG staff] have strong representation on investment committees with the ability to veto transactions if they do not meet the standards we have set on perhaps remuneration,” he said.
“We are now thinking about integrating this group further.”
He said the team had been kept separate for many years but added that, as the fund moved from “responsible investing 2.0 to 3.0”, it needed more integration.
“We are thinking about integrating the staff into the [asset class] departments,” he said.
“We have not quite figured out we might do this, but, ultimately, we want to have [responsible investing] fully integrated into the whole process.”
He also called on other investors wanting to increase or develop their approach to responsible investing to copy the system.
“[The team] are a powerful force,” he said. “If you’re starting to think about setting up ESG practices, you should give this power to someone in your organisation who can work on develop policies and has a veto.”
Lindeijer also praised the support of client PFZW, adding that its goal to be ESG-focused had given the asset manager a strong foundation to incorporate these policies.
PFZW, the pension scheme for healthcare workers, recently committed to quadrupling its sustainable investments and halving its carbon footprint in six years.
Peter Borgdorff, managing director of the €152bn fund, earlier told delegates a scheme’s responsibility was not only to provide income in retirement but also to help build a world members want to retire in.
PGGM also reaffirmed its commitment to the Dutch housing market, as Lindeijer said the manager was now very much on the buy-side, after reducing exposure in recent years.
“It is a good example of what a long-term investor should be doing,” he said.
“When the market was overheating and overvalued, we were pulling back. It has dropped 20% in value, and rental incomes are good value, so we are on the buy-side.”
Other Dutch pension funds have also delved into real estate and mortgages, with growing demand for the asset class, replacing government bond holdings.