pggm.nl Responsible Investment Summary 2017 Annual Report

pggm.nl Responsible Investment Summary 2017 Annual Report

Highlights 2017 Principles for good corporate governance and shareholdership for the American market Publication PGGMhuman rights policy Declaration of intent CSR covenant published SolarCity-deal: new step in sustainable energy investments Classification Sustainable Development Investments - (SDI Taxonomy) published DNB publishes core set of impact indicators for the various SDGs Internal climate research completed. January February March April May June July August September October November December First Impact Investment initiative organised PGGM invests in French green government bonds April-May: Votingseason PGGM, among other things, had a fruitful shareholders' dialogue to prevent abuse of medicines in the United States. Publication report Task Force on Climate-related Financial Disclosures Started with baseline measurement of climate-related risks in the entire investment portfolio. Started with CO 2 divestments within Developed Market Alternative Equities. CO2 GRESB scores published: PGGM Private Real Estate investment portfolio has structurally improved more than the benchmark. 2 PGGM PGGM 3

AREA OF FOCUS Climate change pollution & emissions INSTRUMENTS INVESTING IN SOLUTIONS Water scarcity Food security Healthcare Safeguarding human rights Mandate: at least 20 invested in solutions by 2020 1 13.7 Progress: 13.7 of 20 2 3,3 Area of Focus Euro s invested New in 2017 Impact in 2016 3 Mandate: CO 2 footprint of the investment portfolio halved by 2020 4 Corporate governance Climate change, 6.4 2.9 million MWh of sustainable energy produced pollution & emissions Avoided 4 million tonnes CO 2. Water scarcity 0.9 0 million m 3 water saved Treated 350 million m 3 of wastewater. Food security 2.8 0.2 tonnes/hectare improvement in return 3560 trucks filled with food. Healthcare 3.5 0.2 people provided with access to good healthcare. 54.000 treatments avoided Other 0.1 0 Impact not measured. ESG INTEGRATION 7.8 6 85.000 225.000 Baseline measurement of the equity portfolio as at 31 12 2014: relative CO 2 footprint = 339 tonnes of CO 2 per million $ of company turnover. Stable financial system 28 As at 31-12-2017 the relative CO 2 footprint = 244 tonnes of CO 2 per million $ of company turnover One of the key tasks of a pension fund is to realise optimal return within a responsible risk profile. With the assets entrusted to us by our clients, we are committed to realizing this. We firmly believe that responsible investment and consideration of ESG factors, is supportive of this key task and furthermore makes a positive contribution to a sustainable, liveable world in which pensioners can enjoy a good retirement. This is the wish we share with our clients: we want to achieve good returns and at the same time have a tangible impact on a sustainable world. On behalf of our clients we work on investment solutions that, in addition to realizing financial results, contribute to a sustainable word. In consultation with our clients, we have selected 7 areas of focus for our responsible invstement activities. Climate change, pollution and emissions Water scarcity Food security Healthcare Safeguarding human rights ENGAGEMENT VOTING LEGAL PROCEEDINGS Dialogue with 361 companies and 8 market parties: 46 results achieved among companies, 4 results achieved among market parties Voted at 3.524 shareholder meetings. 41.304 votes cast. 3.1 million in investment losses recovered. Good corporate governance Stable financial system EXCLUSIONS Total: 113 companies and government bonds of 13 countries. Venezuela added to the list of excluded government bonds after EU arms embargo. 1 Commissioned by our largest client. 2 For all clients, both in funds and in separate mandates. The amounts concern the invested assets and outstanding commitments. 3 The impact has been measured in relation to the investments as at year-end 2016. Of the 11.3 invested in Investments in Solutions, the impact of 7.8 in investments has been calculated. This represents 68% of the total Investments in Solutions. 4 Commissioned by our largest client 4 PGGM PGGM 5

Active ownership 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. In this brochure we give a summary of our activities in 2017. The PGGM Annual Responsible Investment Report gives a more detailed account. PGGM S INSTRUMENTS FOR RESPONSIBLE INVESTMENT As an active shareholder, we vote at shareholders meetings around the world. In 2017, we voted at 3.524 shareholder meetings. In addition, we attempt to realise ESG improvements by engaging in dialogue with companies and market parties. In 2017 we engaged in dialogue with 361 companies and 8 market parties. We achieved a total of 50 engagement results. NO What we do not want Direct exclusions: Government bonds on EU/UN sanction lists Controversial weapons Tobacco Exclusion 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 and active ownership: Instruments: ESG integration Engagement Voting Legal proceedings YES What we want to stimulate Creating social returns in the area of: Climate change, pollution and emissions Water scarcity Food security Healthcare Instrument: Investing in Solutions Dialogue with companies regarding waste watermanagement In 2017 we engaged in dialogue with Tyson. With its slaughter houses and intensive livestock farming operations, Tyson is one of the largest water polluters in the US. In 2017 wastewater management has improved. We continue to urge the company to adopt a company-wide policy, for example by bringing a previously rejected shareholders proposal back for a vote. Engagement in the mining, oil and gas sectors Activities in the mining, oil and gas sectors often go hand-inhand with serious violations of the human rights of local communities. In 2017 PGGM engaged in dialogue with various companies in this sector, including Glencore and Freeport McMoRan. Both companies have improved their assessment of potential human rights violations. The reports on these risks have also improved. Dialogue with pharmaceutical companies We engaged in dialogue with of pharmaceutical companies about possible improvements regarding access to health care. We also spoke with pharmaceutical companies about their remuneration policy. For example, we spoke out against the excessive remuneration policy of McKesson. and voted against this policy. After the 74% negative vote, the remuneration policy was significantly adjusted. 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. 6 PGGM PGGM 7

Investing in Solutions INVESTING IN CLIMATE SOLUTIONS TOTAL: INVESTED IN (NON-EXCL.): RESULTS (NON-EXCL.): THE IMPACT OVER 2016 IS EQUIVALENT TO: Through Investing in Solutions we want to realize good financial returns for our clients and at the same time have a tangible impact on a sustainable world. PGGM currently has invested 13.7 in climate, healthcare, food security and water scarcity solutions for its clients. In 2017, 3.3 was spent on new investments in this category, including green bonds issued by governments. INVESTING IN CLIMATE SOLUTIONS 6.4 2.9 > Renewable energy > CO 2 -efficient buildings and production 7.8 million MWh of renewable energy produced 4 million tonnes of CO 2 avoided. CO2 the average electricity use of 2,4 million households per year. In 2016, the total CO 2 emissions avoided due to these investments was more than 4 million tonnes of CO 2. This is equivalent to the average CO 2 emissions of more than 180 thousand households per year. In 2017 new investments were made in a number of areas. For example, we invested in real estate in Berlin and in sustainable distribution centres in Japan. PGGM also invested in SolarCity s solar energy portfolio. In addition, PGGM invested on behalf of its clients in the green government bond issued by the French State. The revenues from this green bond are used to finance sustainable initiatives aimed at reducing CO 2 emissions and increasing biodiversity. INVESTING IN FOOD SOLUTIONS In 2017 we invested in AdecoAgro SA, an Agricultural company active in the field of efficient food production and sustainable energy. This company produces sustainable food using advanced techniques designed to maximise the efficiency of food production, while not depleting the soil at the same time. INVESTING IN WATER SOLUTIONS TOTAL: INVESTED IN: RESULTS: 0.9 0 > Water purification > Water conservation > Drinking water production NVESTING IN FOOD SOLUTIONS 6 million m 3 of water saved 350 million m 3 of wastewater treated. TOTAL: INVESTED IN (NON-EXCL.): RESULTS (NON-EXCL.): 2.8 0.2 > Efficient production > Solutions to combat food wastage 85,000 tonnes improvement in return. THE IMPACT OVER 2016 IS EQUIVALENT TO: the average water consumption of 120 thousand residents in the Netherlands. The number of litres of purified water is equivalent to the average amount of water consumed by taking 6 showers. IMPACT OVER 2016 IS EQUIVALENT TO: 3560 trucks filled with food. Each year we calculate the impact of these investments over the previous year: in addition to the financial return, we indicate how these investments contributed to the selected themes. The overview on the next page shows the social impact of our Investments in Solutions. View our Investments in Solutions webpage for criteria, our measurement method and an overview of our investments. Because institutions use different definitions, it is impossible to compare reported volumes of impact investments and to calculate the precise contribution of the financial sector to solutions to large global challenges. That is why, in 2017, we worked together with other investors and financial institutions on an unambiguous definition and standard for impact investing and on a guideline for measuring impact. Read more about this in the PGGM annual responsible investment report. INVESTING IN HEALTHCARE SOLUTIONS TOTAL: INVESTED IN (NON EXCL.): RESULTS (NON EXCL.): 3.5 0.2 > Medicines > Treatments > Care homes Patients provided with medicines Cancertreatments IMPACT IN 2016: 225.000 people throughout the world had access to healthcare, or benefited from an improved quality of care. 54.000 treatments avoided. 8 PGGM PGGM 9

ESG integration This brochure is a summary of the PGGM Annual Responsible Investment Report 2017. For more information about responsible investment, visit our website. PGGM evaluates possible investments in terms of the expected risk-return ratio. When the identified risks negatively affect the future expected return, PGGM may decide not to invest or to demand a higher expected return. ESG factors are included in this risk analysis. By integrating these risks and opportunities into the investment process, we end up with a better risk-weighted return. Effectively integrating ESG is not easy. It requires investors to change their mindset and it requires the necessary skills. PGGM took further steps in this area during 2017. We organized knowledge sessions with the investment teams to enable them to independently perform ESG analyses as part of their investment activities. In addition, more investment teams developed responsible investment guidelines that they use in their daily activities. We are asking our external managers to provide greater transparency, for example by means of GRESB Real Estate and GRESB Infrastructure. Finally, the ESG screening of the ESG implementation by our external managers has improved. Read more about how the various investment teams integrate ESG factors into their investment decisions in the PGGM annual responsible investment report. www.pggm.nl/responsibleinvestment www.pggm.nl/investinginsolutions This brochure is published by PGGM Vermogensbeheer B.V. Contact: Responsible Investment +31 (0)30 277 9911 responsible.investment@pggm.nl CO 2 EMISSIONS OF INVESTMENTS We aim to counteract climate change by reducing the CO 2 emissions of our investments. Since 2016, we have been selling shares of the most CO 2 -intensive companies in the most polluting sectors: utilities, energy and materials (70% of the total footprint comes from companies in these sectors). We reinvest the freed-up capital in shares of the most CO 2 -efficient companies within these 3 sectors. The picture below shows the development of the carbon footprint over time, including the starting point: the baseline measurement at the end of 2014. GOAL 2020 Halve the CO 2 emission to 170 ton/million $ company turnover PROGRESS (ton/million $ company turnover) 2015 325 ton CO 2 2016 324 ton CO 2 BASELINE MEASUREMENT 2014 339 ton/million $ company turnover 2017 244 ton CO 2 Disclaimer We provide this summary of the PGGM Annual Responsible Investment Report 2017 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 2017, the Dutch version shall prevail. 10 PGGM PGGM 11