PGGM — the asset manager of the €116.2 billion ($152 billion) Pensioenfonds Zorg en Welzijn — on Friday became the first institutional investor to publish a policy to specifically integrate environmental, social and governance factors into its private equity investments.
A separate ESG policy is needed for private equity because of the active ownership model that is particularly “well suited to manage ESG opportunities and risks,” according to the policy, which was published online at http://pggm.nl/Images/PGGM%20Responsible%20Investing%20in%20Private%20Equity%20Policy_tcm21-184793.pdf. Furthermore, the policy distinguishes between fund investments, co-investments and secondary investments in private equity,
ESG factors can enhance risk-adjusted returns by improving returns, decreasing costs and reducing risk, according to the policy statement.
“Private equity is precisely the sort of investment category which offers investors a pre-eminent opportunity to stimulate sustainability,” said a news release about the new policy. “This is because, in private equity, the distance between companies and investors is relatively small and investments are generally long term.”
As of June 30, about 7% of PfZW’s total portfolio was invested in private equity.