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IPE special report May 2018

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Sustainable investment required to achieve returns in future, warns PGGM

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Investors that do not pursue a sustainable investment approach risk being left with no returns at all, according to an adviser at PGGM, the €150bn Dutch pensions manager.

Chris Limbach, adviser to chief investment manager Eloy Lindeijer since January last year, said PGGM and its largest client, the €135bn healthcare sector pension fund PFZW, felt there was a need to “push [sustainable investment] to the next level”.

He told delegates at the WorldPensionSummit in Amsterdam that, “thinking in terms of decades”, it was only possible to achieve “solid” returns in a sustainable environment.

“You need a world sustainable environment to achieve those returns,” he said. ”If we are careless there, then, in the end, there are no returns to be gained [at all].”

Limbach, former head of quantitative strategies at PGGM, also spoke out against passive investment, arguing that it should not be an approach considered by an investor of the company’s scale.

“We used to think – or the market, by and large, used to think – we could take a passive approach,” he said. ”Markets are fairly efficient, and we just sit back to do, maybe, an efficient implementation. Just buy the benchmark and buy the index.

“The steering power of the capital, you can really make an impact with that money. It’s almost irresponsible if you just invest that money in a passive manner.”

He argued that the money should be used to bring about change, and to ”change the industry”, adding that PGGM was “just getting started” in that regard.

The adviser also said the board at PFZW had recently completed a review of its investment strategy, which had seen it “take ownership” of the approach.

The change followed pressure from Dutch regulator De Nederlandsche Bank to increase the number of board members with an understanding of investment matters across the pensions sector.

Of the new strategy, Limbach said: “It’s their investment belief, their vision, and now they say to PGGM ‘This is what we think, and you go do it’.

“It’s a big shift. It completely turns around the whole model where you have a board that sits back and have the experts do everything. Now [the board is] taking a step up, being in control and taking responsibility.”

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