ESG & Responsible Investment in CRS

We aim to fully integrate sustainability into the investment process, alongside risk and return. We call it 3D investing.

When investing in Credit Risk Sharing (“CRS”) transactions, we invest in the broader economy and not just in what is considered ‘green’. Rather than solely looking at the current ‘greenness’ of assets or companies, we look at how the real economy can become greener and the role of both banks and investors in facilitating this transition. By investing in CRS, we actively contribute to the development of sustainable finance and have incorporated environmental, social and governance (“ESG”) standards in our investment decision process for every transaction we do. After all, the transition to low-carbon economy and meeting the Paris climate goals  require all businesses to contribute to improving the ESG footprint.

ESG in due diligence process

As part of our core beliefs, PGGM integrates ESG factors in the due diligence (“DD”). During the assessment of the bank’s origination strategy and quality of the risk management process, we investigate which ESG policies the bank has implemented, how it ensures these are being adhered to and impact the bank’s decisions, and to what extent the convictions behind these policies are part of the bank’s culture.

We conduct an ESG DD for each transaction using our ESG DD framework so that we can score and benchmark banks against each other in their progress. Our ESG framework includes i.a.: 

• review of the lending policies of the bank in relation to oil & gas, thermal coal, human rights, and biodiversity related policies,
• review of the bank’s Paris-alignment, e.g. commitment to net zero, interim and long-term emission reduction targets, including disclosure and reporting standards.  
• review of the bank’s commitments to responsible business conduct such as the United Nations (“UN”) Principles of Responsible Banking, the Equator Principles and  UN Global Compact,
• review whether the bank measure how their loans contribute to the UN Sustainable Development Goals.

Besides scoring all our risk-sharing partners on ESG topics, we seek to incorporate specific ESG criteria in the investment itself as to ensure the lowest chance of our client having undesired exposures, as reflected through the  PGGM Responsible Investment Policy in Credit Risk Sharing.

We also consider it important that banks support the transition of the broader economy, not just what is already ‘green’. For that reason, we aim to engage with our risk-sharing partners and encourage processes and policies that we believe contribute to transition to low-carbon economy.

More information about PGGM approach to Responsible Investing can be found here and in the PGGM Responsible Investment Implementation Framework .