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APG Asset Management

PRI reporting framework 2020

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Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

Other description (1) Quantitative targets on Responsible Investment (see SG 01.5)

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

APG Asset Management (APG) is a fiduciary manager for Dutch pension funds. We invest globally with the aim to enable our clients, on whose behalf we invest, to achieve the highest net return for their beneficiaries while ensuring the pension funds remain strong and future-proof. As a leading long term responsible investor we want to enable pension fund beneficiaries to rely on a good income upon retirement and enjoy that income in a sustainable world. All investment policies are geared towards achieving this dual objective.

One of APG’s investment beliefs is that good governance and responsible investment are key.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

APG's Responsible Investment & Stewardship Policy applies across all asset classes and is described in more detail below:

  1. Responsible investment is an integral part of the investment process at APG. We take shareholder rights and environmental and social factors into consideration in our investment decisions. Research in the fields of sustainability and shareholder rights can lead to a decision to decline a certain investment offer, to sell the investment, or to increase or reduce the size of the investment.
  2. APG enters into dialogue with companies in order to achieve sustainability and good corporate governance.In meetings with companies we make our standards on sustainability and shareholder rights clear. To emphasize our message, we often cooperate with other investors in this area.
  3. APG expects companies to act with respect for the principles of the UN Global Compact, and we will sell the shares we hold if dialogue does not lead to improvement. Moreover, APG does not invest in products which are banned under Dutch law or international regulations.This means that we do not invest in companies that are directly involved in the production of land mines, cluster munitions and the firing systems for such munitions, or the production of chemical and biological weapons or nuclear weapons in contravention of the Nuclear Non-Proliferation Treaty. The minimum standards for companies in the fields of human rights, labour standards, the environment and corruption are specified in the UN Global Compact.
  4. APG does not invest in sovereign bonds issued by countries that are subject to an arms embargo by the UN Security Council. A UN Security Council arms embargo indicates that there is serious concern about a country's human rights situation.
  5. APG actively exercises our rights as shareholder. We vote at the shareholders' meetings of the companies in which we invest and we publish our voting behaviour.
  6. APG strongly advocates robust Dutch and international laws and regulations aimed at promoting sustainability and good corporate governance.We regularly discuss sustainability and shareholder rights with legislators and regulatory bodies. We also contribute to the development of standards aimed at improving the integrity of the financial markets over the long term.
  7. APG actively looks for attractive investments that promote sustainability.APG seeks investments that contribute to more sustainable societies by addressing environmental and/or social challenges including climate change, pollution, water scarcity, the loss of habitats and species, education, poverty and socio-demographic trends and imbalances. APG's main societal responsibility is to deliver affordable pensions to its clients and their beneficiaries, and hence these investments have to match APG's risk-return requirements.
  8. APG actively propagates our responsible investment policy in order to promote sustainability and corporate  governance. We cooperate with other asset managers and pension funds across the world in order to increase the effect of our responsible investment policy for our clients. We are active in various Dutch and international forums of cooperation and we communicate extensively about our activities.

For 2016-2020 our largest client, ABP, has set the following objectives:

  • To have €5 billion of our assets invested in renewable energy;
  • To reduce the CO2 footprint of our listed equity portfolio by at least 25%;
  • To double our investments in Sustainable Development Investments 
  • To invest €500 million in education-related properties and infrastructure;
  • To invest €500 million in communication infrastructure.

For 2016-2020 our largest client, ABP, has set the following engagement objectives:

  • Companies in the textiles and clothing sector will provide safe working conditions throughout the production chain (in line with the agreements in the Bangladesh accord);
  • Companies in the shipbuilding sector in which we invest will publish a policy for safe working conditions which will be applied throughout the chain;
  • We support the GRESB Infrastructure benchmark as the new sustainability standard (including safety, health and the environment) for investments in the field of infrastructure and at least half of our infrastructure investments will report to GRESB Infrastructure; 
  • Companies which we invest in covering the ICT, textiles and clothing and energy sectors will publish human rights policies;
  • We will engage with companies in in the cocoa production chain to eliminate child labor in the supply chain.

Another client of APG, bpfBOUW has set the following targets towards 2020:

  • To reduce the CO2 footprint of our listed equity portfolio by at least 25%;
  • To aim for €12 billion exposure to Sustainable Development Investments
  • To engage with companies in the construction, garment and shipbuilding sector on safety and labor conditions

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

We have used scenario analysis to explore plausible future developments up to 2040 in the economic sectors and countries that we invest in. We have used both a 'business-as-usual' scenario and a '2-degrees' scenario.

From these scenarios, we identified 44 climate factors. These are the key drivers of climate-related risk and opportunity that may impact the economic sectors that we invest in, e.g. carbon pricing, extreme heat, decreasing oil demand, flooding, rise of renewable technologies.

We have categorized these climate factors in three buckets: Policy & Regulation, Technology, Market & Reputation and Physical Impact. For each sector and country, we assessed the most significant climate factors, and how these may impact on growth and cost levels in the sector. We have done this for 26 economic sectors and the majority of countries in the investable universe covering, in total, approximately 70% of the portfolio, using the time horizons 2022 - 2030 - 2040.

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe the associated timescales linked to these risks and opportunities.

The scenario analysis undertaken used time horizons 2022, 2030 and 2040.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

APG has established a Climate Risk Policy which describes the climate risk approach. The APG AM Climate Risk Policy covers the entire investment process as performed on behalf of our clients: From investment beliefs towards evaluation. Climate related considerations are included in the Strategic Asset Allocation, mandating process, portfolio management and in the Annual Mandate Review cycle. This policy is dependent on the availability of tooling and measurements, which is a field still very much in development. Tooling that is already available within APG includes the traffic light model and a climate dashboard.

The traffic light model captures the results of the climate scenario analysis, which offers insight into the most pressing risks and opportunities in 2022, 2030 and 2040.This analysis will be conducted every two years to capture the latest developments into the scenarios. Next to that, we developed a climate dashboard with 20 indicators that together give insight into the speed of which the transition to a low-carbon economy is going. This dashboard will be updated every year and will be available broadly within APG Asset Management. The two tools enable a high-level organization-wide view on the key climate related risks and opportunities in the portfolio, and the speed at which these may be manifested.

The portfolio managers and sector specialists of the various investment strategies are primarily responsible for managing of climate related risks and capturing opportunities, since at that level the specific knowledge is available on how climate change can impact investments. The organization-wide insights from the climate scenario analysis can raise points of attention and priorities for follow-up by the portfolio managers. Therefore, the portfolio managers are the so-called first line of defense within the risk management framework.

With the climate scenario analysis, APG has made steps to further integrate climate change also into the so-called second line of defense. The traffic light model and the dashboard are available for management teams and the risk management department of APG, as well as for our clients. In the coming years, work will be done to further integrate climate change into the second line of defense function.

Current mitigation measures include:

  • Actively monitoring developments in policy, markets and technology through research, company meetings, trade fairs, conferences, in-situ visits, etc. For example, in 2019 a portfolio manager covering the Utilities sector went on a field trip to Germany to, amongst others, speak with politicians about the developments German policy towards phasing out coal-fired power generation.
  • Accounting for carbon pricing, reduced volumes of fossil fuels and other financial impacts in investment cases and CIP memos, e.g. a 15% annual reduction in coal transport for investments in US rail transport companies.
  • In illiquid asset classes, an investment rationale focused on next-generation assets. Long-term risks are included in due diligence and subject to GRIG sign-off.
  • Analysis of companies' transition strategies and capex plans, particularly in transition sectors such as oil& gas and automobiles.

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.

specify

          Responsible Investment Report
        

SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

URL/Attachment

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

APG AM has adopted an internal Code of Conduct to detect and manage potential conflicts of interest, which is being monitored continuously and reviewed annually. Where a potential Conflict of Interest is apparent, APG AM can decide to refrain from engaging in a particular activity.

APG AM also has specific existing policies on Insider dealing, gifts, invitations and entertainment, and additional functions.

If for any reason pre-emptive measures have not been successful in mitigating a potential Conflict of Interest, APG AM will endeavour to make any information pertaining to such conflict available to all relevant stakeholders.

 

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

All companies are screened on the basis of the UN Global Compact (UNGC) principles. APG procures services from several data vendors in order to identify issues at portfolio companies in relation to the UNGC principles and other ESG areas. We also expect third party private equity managers to promptly inform us in the event an incident occurs in a portfolio company. In addition, information from brokers and NGO’s can be used to identify issues at portfolio companies. When issues are identified, APG can reach out to the investee company or relevant external manager for clarification and fact checking purposes or initiate a longer term engagement.


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