PGGM Becomes More Picky to Generate Investment Return, Add Social Value

(April 21, 2011) — The $153 billion asset manager PGGM has increased its environmental, social and governance (ESG) allocation by $1.6 billion to $5.4 billion in 2010, according to its Annual Responsible Investment Report.

“Responsible investment is immensely important to PGGM,” the pension provider’s chief investment officer Jac Kragt said in a statement. “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.”

The fund worked with Erasmus University Rotterdam to determine the impacts of ESG investments in order to generate financial returns and add social value in areas such as local economic development, biodiversity and health, according to the report. Furthermore, PGGM analyzed the effects of climate change and climate policy on the overall portfolio in anticipation of stricter rules for a climate-neutral future following heightened regulation.

The moves by PGGM follow a report by Sweden’s AP funds that outlined activities in socially responsible investing in 2010. In March of last year, the biggest Swedish pension barred Israeli arms maker Elbit Systems from its investment portfolios in an effort to remain a role model for socially responsible investment. In September 2009, the State Pension Fund in Norway, one of the world’s biggest investors, followed Sweden’s AP funds and decided to divest from Elbit Systems.

Sovereign wealth funds in Saudi Arabia and Kuwait have also become increasingly attracted to investments that benefit future generations. For example, Abu Dhabi’s Future Energy Company has supported environmental investments through its Masdar Clean Tech Fund, and Norway’s Government Pension Fund has championed its effort to remain a role model for socially responsible investment, blocking 17 tobacco companies from its fund. Additionally, China’s fund has committed to larger clean energy projects.