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APG Asset Management

PRI reporting framework 2018

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Asset class implementation not reported in other modules

SG 16. ESG issues for internally managed assets not reported in framework (Not Applicable)


SG 17. ESG issues for externally managed assets not reported in framework

17.1. Describe how you address ESG issues for externally managed assets for which a specific PRI asset class module has yet to be developed or for which you are not required to report because your assets are below the minimum threshold.

Asset Class

Describe what processes are in place and the outputs or outcomes achieved

Commodities

In the commodities portfolio, investments are made directly or indirectly via funds in unlisted companies with operations in the fields of forestry, agriculture, mining, and oil and gas exploration and production. We have a set of internal ESG guidelines for natural resource investments which include asset-specific due diligence questions. APG sets high demands on the ESG performance of these companies as well the supervision of that performance by the funds in which we invest. For example, we require all the funds investing in mining and oil and gas production in emerging markets to agree contractually to adhere to working procedures in accordance with internationally accepted guidelines. Specifically, this concerns the guidance associated with the IFC (International Finance Corporation) Performance Standards on Environmental and Social Sustainability.

Moreover, each investment in this portfolio is dependent on approval by the GRIG Team. The portfolio managers furthermore regularly visit investment projects in the commodities portfolio. These visits serve to ensure that, among other things, the ESG performance of the investments can be properly assessed.

Hedge funds - DDQ

Select whether you use the PRI Hedge Fund DDQ

Hedge funds

Hedge funds are investment funds that apply a wide variety of strategies in order to achieve returns on the financial markets. Pre-investment, APG screens all investments in hedge funds in terms of ESG aspects, with the GRIG team having an important say in the assessment of the funds. The GRIG team is consequently closely involved with the assessment of all new investment proposals. The analysis by the GRIG team is moreover evaluated by an internal investment committee. We continue to be actively involved in furthering ESG integration in this asset class within the investment community. APG is represented on the PRI Hedge Funds Advisory Committee. 

Forestry

We invest in forestry funds via our commodities portfolio. In addition to all the standard ESG requirements for all APG investments in the commodities asset class, we require managers investing in timber assets to operate in accordance with a sustainable forestry certification scheme (such as the FSC or equivalent). If not in place such certification needs to be sought in order for us to invest. Sustainable forestry certification schemes usually include requirements regarding greenhouse gas emissions, harvesting methods, genetically modified organisms, maintaining soil fertility and the use of agricultural chemicals.

Farmland

We invest in Farmland via our commodities portfolio. Therefore, each investment in this portfolio is dependent on approval by the GRIG team. The portfolio managers furthermore regularly visit investment projects in the commodities portfolio. These visits serve to ensure that, among other things, the ESG performance of the investments can be properly assessed. In addition, in the field of agriculture, we not only review and judge our investments on ESG factors, but we also make a contribution to the development of the standards for investing in agricultural land. Working together with other institutional investors we have been instrumental in drawing up the Principles for Responsible Investment in Farmland, with the aim of improving sustainability, transparency and accountability in this area.

Inclusive finance

We track which of our investments in the inclusive finance space are managed by PIIF signatories. Depending on the type of investment, APG may include specific ESG-related provisions in the legal documentation concerning an individual investment. We require our inclusive finance managers to provide information on the ESG performance of their portfolios on a regular basis. For this purpose, a combination of data based on certain industry standards (e.g. IFC Performance Standards) and high level portfolio company data is provided to us.

17.2. Additional information.

The basic manager selection, appointment and/or monitoring process is the same for all of the above asset classes and is described in the overview section at the beginning of this module.

We also have separate responsible investment implementation guidelines for hedge funds, private equity and commodities (this includes forestry and farmland). In addition, we have developed guidance on Unconventional Gas Operations for external managers. We expect High Sustainability Investments to be reported to us from all asset classes. With the newly developed Sustainable Development Investments (SDIs) we continue to build on this expectation.

Our real estate managers have to agree to the following conditions, which are included in the legal documentation:

  • Participation of the investment in the annual GRESB-survey for the full holding period of our investment; and
  • To the extent that the investment has not yet achieved above average sustainability performance (i.e. becoming 4 or 5 star rating in the GRESB benchmark), the manager agrees to work in good faith with APG to identify and to implement agreed upon strategies designed to achieve the required outperformance within three years' time.

Since early 2016 infrastructure managers also have to agree to participate in the GRESB Infrastructure survey.


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