pggm.nl Responsible Investment Summary 2016 Annual Report 1 PGGM

Transcription

1 pggm.nl Responsible Investment Summary 2016 Annual Report 1 PGGM

2 Responsible Investment Overview 2016 AREAS OF FOCUS Climate and Water Food Health Human Rights Corporate Stable Financial Environment Governance System INSTRUMENTS INVESTING IN SOLUTIONS Mandate: at least 20 billion invested in solutions by billion Total: 11.3 billion 2 New in 2016: 2.79 billion Area of Focus Euros Invested (millions) Impact in Climate and 3,860 ( 820 in 2016) million MWh of renewable Environment energy produced. 4.0 million tonnes of CO 2 avoided. 38 Water 867 ( 451 in 2016) million m 3 of water saved 65 million m 3 of wastewater treated 111,000 Food 2,800 ( 629 in 2016) tonnes/hectare improvement in return. 640 million litres of milk produced in developing countries. 530,000 Health 3,690 ( 893 in 2016) people provided with access to good healthcare. Other 117 ( 0 in 2016) Impact not measured. 1 Commissioned by our largest client. 2 For all clients, segregated as well as funds. 3 The impact is measured in relation to the investments as at year-end Of the 8.9 billion invested in solutions, the impact of 4.9 billion in investments is calculated. This represents 55% of the total investments in solutions. For the remaining 45%, there was insufficient data to measure the impact 4 Commissioned by our largest client. ESG INTEGRATION Mandate: CO 2 footprint of the investment portfolio halved by Baseline measurement of the equity portfolio as at : relative CO 2 footprint = 339 tonnes of CO 2 per million dollars of company turnover. On , the relative CO 2 footprint = 326 tonnes of CO 2 per million dollars of company turnover ENGAGEMENT VOTING LEGAL PROCEEDINGS EXCLUSIONS Dialogue with 323 companies and 23 market parties: 76 results achieved among companies 5 results achieved among market parties Voted at 3,657 shareholder meetings. 41,855 votes cast. 3 million in investment losses recovered. Total: 113 companies and government bonds of 12 countries New in 2016: first company excluded after engagement concerning improvements in corporate governance did not yield any results.

3 Responsible investments enable our clients to realize a valuable future for pensioners. We are convinced that financial and social returns go hand-in-hand. On behalf of our clients, we work on investment solutions that, in addition to realizing financial results, contribute to a sustainable, livable world. We want to make a focused contribution to a sustainable world. This is why, in consultation with our clients, we have selected 7 areas of focus for our responsible investment activities. In this brochure we give a summary of our activities in The PGGM Annual Responsible Investment Report gives a more detailed account. We apply 6 instruments for the purpose of contributing to solutions to social challenges by means of our investments, encouraging companies to make sustainability improvements and excluding companies that carry out activities we do not support. PGGM s Instruments for Responsible Investment NO What we do not want Direct exclusions Controversial weapons Tobacco Exclusions after engagement on: Human rights and social circumstances Environment Corporate governance Instrument: Exclusions CHANGE What we want to improve Making companies and markets more sustainable through ESG integration, active ownership and collaboration with financial service providers Instruments: ESG integration (including ESG Index Engagement Voting Legal proceedings YES What we want to stimulate Creating social returns in the area of: Climate and environment Water Health Food Instrument: Investing in solutions Figure 1. Triptych with instruments for responsible investment Active ownership As an active shareholder, we vote at shareholders meetings around the world. In 2016, we voted at 3,657 shareholder meetings. In addition, we attempt to realise ESG improvements by engaging in dialogue with companies and market parties. In 2016 we engaged in dialogue with 346 companies and market parties. We achieved a total of 81 engagement results. If necessary we conduct legal proceedings, for instance to recover investment losses or to enforce good business behavior. Finally, we can exclude companies and government bonds if we or our clients deem them unsuitable. ESG-integration Since 2016, the investment and advisory teams have been given full ownership of the daily activities relating to responsible investment. Our ultimate aim is for responsible investment to be a natural given for all teams and that it is fully internalised as part of our daily activities. In 2016, the investment and advisory teams have made progress in the field of responsible investment and have achieved good results. For example, our real estate funds have shown an outperformance on the Global Real Estate Sustainability Benchmark (GREB), that assesses real estate in terms of sustainability. Our Public Market teams have worked on anchoring engagement within their investment approach and have developed an innovative framework for green bonds. Investments in Solutions For our clients, we invest in solutions in the areas of climate and environment, water, food and healthcare. Each year, where possible, we calculate the impact achieved through these investments. In 2016 we invested 2.8 billion in new solutions. We do this through private and through public markets. Since 2016 we have a special portfolio for investing in listed stocks. By investing in solution, we contribute to the United Nations Sustainable Development Goals (SDGs). 3 PGGM

4 More and more financial institutions embrace the SDG themes as a widely accepted framework for impact investments. In 2016, we worked with APG to create an international standard for institutional investments in SDGs that increase the comparability and consistency of impact investments. These investments are called Sustainable Development Investments (SDI s). The following overview shows the social impact of our Investments in Solutions. See our website for our investments in solutions criteria and our measurement criteria. CLIMATE AND ENVIRONMENT Total: 3.86 billion New in 2016: 820 million Invested in (i.a.): > Renewable energy > CO 2 -efficient buildings and production Results (i.a.): 3.8 million MWh of renewable energy produced. 4.0 million tonnes of CO 2 avoided. Impact of these investments in 2015: equivalent to the average electricity use of 1,100,000 households per year. WATER Total: 867 million New in 2016: 451 million Invested in i.a.: > Water treatment > Water conservation > Drinking water production Results i.a.: 65 million m 3 of wastewater treated. Impact of these investments in 2015: litres of treated water equivalent to taking 1.4 billion showers 65 million m 3 HEALTH Invested in: > Medicines > Treatments > Care homes Total: 3.69 billion New in 2016: 893 million FOOD Total: 2.8 billion New in 2016: 629 million Invested in (i.a.): > Efficient production > Solutions to reduce food wastage Results: > Patients provided with medicines > Cancer treatments Impact of these investments in 2015: provided acces to good healthcare for 530,000 people Results (i.a.): 640 million litres of milk produced in developing countries. Impact of these investments in 2015: 4600 trucks filled with food. Figure 2. Investing in solutions and social impact in numbers 4 PGGM

5 Climate and Environment Investments in climate solutions To counter climate change, we invested over 820 million in climate solutions in Amongst others we invested in green bonds of ABN AMRO and Alliander. The yield of these green bonds was used to finance mortgages for energy efficient buildings, and the financing of investments in sustainable buildings and heat networks. Climate working group Building on our previous work and following the Paris Climate Conference, we initiated an internal climate working group in order to identify and manage climate risks within the portfolio. The objective of the working group is to better understand how climate change, and the measures taken to counteract climate change can affect the portfolio, and to advise our clients on how to manage the risks and exploit opportunities. CO 2 reduction in the portfolio We aim to counteract climate change by reducing the CO 2 emissions of our investments. As of 2016, we are selling stocks of the most polluting companies in the three most polluting sectors, namely energy, utilities and materials. The freed-up capital will be reinvested in cleaner companies. We use the phased reduction of equity interests as a signal to CO 2 - intensive companies. We combine this approach with intensive shareholder dialogue. We have sent letters to these companies to explain our policy and address the companies CO 2 intensity. Our aim is to stimulate sustainable production. Water Investments in water solutions By the end of 2016, we invested a total of 867 million on behalf of our clients in water solutions. For example, we invested in Banco Nacional de Costa Rica. The proceeds from this investment are used for the purification of wastewater. We also invested in the company Suez, which focuses on the production of drinking water. In 2015, Suez treated about 4.3 million m 3 of wastewater. This equals 6 times the annual Dutch water use. Active ownership In 2016, together with other investors, we submitted shareholder proposals for water pollution improvement by Hormel, a large American food and meat producer that pollutes water due to intensive livestock farming. This has resulted in improvements in the management of water risks by this company. Dialogue with market parties for better insight in water risks We are engaging market parties to develop better insight into material water risks and opportunities, so these can be integrated into investment decisions (ESG Integration). 5 PGGM

6 Food Investments in food solutions We focus on investment opportunities in solutions for food production, access to food and food quality. In 2016 we invested over 629 million in food solutions on behalf of our clients. We made a new investment in a food security solution: a bond in the fertilizer manufacturer Eurochem. This company distributes artificial fertilisers throughout the world, in particular in developing countries. Artificial fertilisers are required to increase the availability of food. This contributes to greater food security and provides a better income for local farmers in developing countries. Dutch trade mission in Indonesia The necessity for a land ownership register was raised by the Dutch trade mission in November 2016, in which we took part. We made a plea to the governments of the Netherlands and Indonesia to work together on establishing a clear property ownership and right of land use register ( One Map ). This register would allow palm oil companies and their investors, as well as other land users to be assured of their rights. Lack of clarity in this area is a source of conflict between forest communities, farmers and companies. Healthcare Investments in healthcare solutions On behalf of our clients we invest in companies that work on strategic solutions for improved (access to) healthcare. In 2016, we invested 893 million in healthcare solutions. At the end of 2016, we had a total of 3.69 billion invested in healthcare solutions on behalf of our clients. We invested in pharmaceutical companies that make a material contribution to healing or reducing the effects of various illnesses. In addition to investments in the pharmaceutical industry, we also invested in suppliers to this industry, such as suppliers of laboratory equipment, capable of accurate and fast diagnostic tests. Dialogue on access to healthcare and medicine In 2016, we wrote to the large pharmaceutical companies in North America, Europe and Asia, asking them to better integrate access to healthcare in their strategy. In addition, we engaged in dialogue with several companies, concerning improved access to medicines. Following our engagement, Takeda, Japan s largest medicine manufacturer, introduced a new Acces to Medicine Policy. ESG integration relating to healthcare We incorporate material healthcare-related opportunities and risks into our investment processes. For instance, in infrastructure investments, health and safety are a fixed part of the monitoring discussions. Management is asked to devote attention to these risks, particularly if performance is less than satisfactory. 6 PGGM

7 Human rights Working conditions in the agricultural Sector Together with several investors we developed and published a statement under the PRI banner in which investors declare they will engage in a dialogue with beverage companies concerning working conditions in the agricultural chain. The first companies in this sector have been notified. This engagement will continue over the next 2 years, with the aim of making the agricultural sector aware of investors expectations regarding labor standards in the supply chain and improving their practices and reporting on these issues. A new human rights policy We believe, as an investor, we have a responsibility in terms of human rights. Therefore, we have drawn up the PGGM Human Rights Policy. In this policy we indicate how we implement our responsibilities in the area of human rights, within our company and with regard to our investments Improvements in the mining sector We conduct active discussions with companies in the mining sector. At Glencore plc and Freeport- McMoRan Inc. we find that the assessment of potential human rights violations is better identified and that their reports on these risks have improved. Corporate governance Cooperation for improved corporate governance Well-functioning companies are a prerequisite for sustainable socioeconomic development and contribute to a better return. In order to improve corporate governance, we contributed to Eumedion s review of the Dutch principles of corporate governance and good shareholding. The Corporate Governance Code was published in December In addition, we initiated the Corporate Governance Principles for US Listed Companies and Institutional Investors, published in early Exclusion In 2016, we excluded Altice N.V., following engagement about its corporate governance. After many talks about the introduction of unequal voting rights and other governance issues, Altice was not prepared to make the desired adjustments. 7 PGGM

8 Stable financial system Compensation guideline for financial service providers We believe in reward for real performance and that remuneration incentives focused on the long-term work. We therefore work with a Compensation Guideline for all asset classes that includes a description of acceptable management fees, performance fees, transaction costs and redemption fees. Furthermore, this guideline provides for greater insight into the asset management costs for our clients. Behavior of counterparties In 2016, we continued to develop our Sustainability Ladder for banking counterparties. We use this tool to score banks in terms of their contribution to a stable and sustainable financial system. We assess subject areas such as transparency, stability and long-term sustainable behaviour. The results of this measurement will be shared with the analysed banks in This brochure is a summary of the PGGM Annual Responsible Investment Report For more information about responsible investment, visit our website. This brochure is published by PGGM Vermogensbeheer B.V. Contact: Dr Marcel Jeucken Managing Director Responsible Investment +31 (0) responsible.investment@pggm.nl Disclaimer We provide this summary of the PGGM Annual Responsible Investment Report 2016 as a service for our clients and other interested parties. Although we have taken the utmost care in compiling this report, we cannot guarantee that the information is complete and/or accurate in all cases. Nor do we guarantee that its use will lead to the correct analyses for specific purposes. Therefore we can in no case be held liable for among other things but not exclusively any deficiencies, inaccuracies and/or subsequent amendments. The use of this report is not permitted without our prior written consent, other than for the stated purpose for which we have compiled this report. In the event of discrepancies between different versions of the summary of the PGGM Annual Responsible Investment Report 2016, the Dutch version shall prevail.