Investments now all about impact measurement

In the Covid year of 2020 and much more than previously, we saw a convergence of two significant developments that affect us as asset manager: the call for radical transparency and general demands about the impact of investments. Partly driven by the avalanche of largely European legislation and regulations, our clients, their members, supervisory authorities, and other stakeholders increasingly want to know more about the footprint of our investments on people, the environment and society. Not a week goes by without NGO campaigns or the media calling on us to demonstrate accountability.

PGGM therefore needs to deliver ‘hard’ evidence to demonstrate the results of our efforts to reduce the negative and increase the positive impact of investments. This is also a feature of the PGGM Asset Management Annual Report that was published on 19 May 2021. Under the motto ‘pensions with purpose’ our preference would be to only operate where financially attractive and socially desirable investments overlap.

However, as investor we cannot only be active in that overlap and operating outside this makes negative impact unavoidable. In addressing the negative side effects, ‘engagement’ is the most important instrument on the public equity and bond markets, while the impact for private equity or infrastructure depends on the company, fund, or project in which we invest.

Our continued investment in our own capacity to view all our investments in 3D: returns, risk, and impact, has resulted in us improving our impact measurement this year too. However, a lot still needs to be done to standardise impact measurement. Following on from the success of GRESB¹ we are proud of the Sustainable Development Investment Asset Owner Platform (SDI-AOP) that we helped establish in 2020².

The increasing urgency of calls to cause less damage and generate a greater positive impact with investments are advancing against a backdrop of increasing concerns about climate change and water shortages, human rights and social inequality, and deforestation and biodiversity. If 2020 has taught us anything, it’s that underestimating system risk can have a rapid and significant impact on people and society. And it’s possible that Covid was just a foretaste of the exponential developments that await us.

PGGM needs to respond better to this. We need to do more than check the rear view mirror and will need to develop believable scenarios and partnerships with universities and knowledge networks. We also need to invest in cultural change so that we can and dare to take new risks in a responsible way.

For investments, 2020 was both a successful and an important year: it gave us a glimpse of an exponential future with all its associated challenges. PGGM remains convinced when making changes that financial and social results will converge in the long term. We aim to accelerate this convergence through continued prudent investment and by taking the lead in measuring and managing impact. This will enable us to keep providing a good pension to our clients and their members in a better world.

1. Global Real Estate Sustainability Benchmark
2. With APG, AustralianSuper and British Columbia Investment Management Corporation