Pension funds around the world should do more to improve the markets and the planet, thereby improving sustainability and potentially helping to restore trust in the financial system.
Speaking on a panel on responsible investment and environmental, social and governance issues, Michael Jantzi, CEO at Sustainalytics, referred to car manufacturer Henry Ford to illustrate the effects of ESG-aware investment.
“Henry Ford didn't just make cars; he changed the way cars are made,” Mr. Jantzi said, addressing delegates at the WorldPensionSummit, held Wednesday in The Hague, Netherlands. “He created lower-cost, better-quality products by revolutionizing the process; in some ways that is what we are going to be talking about. We will hear today about the value of ESG as an investment process, in the hope that you can create a better outcome for your members.”
He referred to comments made earlier in the day by Peter Borgdorff, managing director at the €156 billion ($194.6 billion) Pensioenfonds Zorg en Welzijn, Zeist, Netherlands: “It is not just about financial security for members, but securing a world in which your plan members wish to retire into.”
“Still we have a system that is rewarding people for creating investments for things that are happening today instead of things that are happening tomorrow,” added Fiona Reynolds, managing director at the United Nations-supported Principles for Responsible Investment.
That view was supported by Eloy Lindeijer, chief investment officer at pension provider and fiduciary manager PGGM. “We are very fortunate that we have a mandate to move ahead on the topic of responsible investment,” Mr. Lindeijer said. Another mandate is (to) look at the growth contribution that we can make to the Netherlands. We have the ability to invest in the local economy, bringing capital to invest and get the economy going again.”
His remarks echoed those of Chinelo Anohu-Amazu, director general of the National Pension Commission of Nigeria, who said earlier in the day that having a strong pensions system is fine, but it is necessary to have strong systems around that are contributing to the local economy through infrastructure investments. Showing investors that their assets helped build a road or real estate, Ms. Anohu-Amazu said, could also help to restore trust.
PGGM is increasing its allocation to Dutch real estate, after it pulled back when it found the sector overheating. “Long term that is what we should be doing — being countercyclical,” Mr. Lindeijer said. It is also looking at buying opportunities in Dutch housing stock, where properties are in need of renovation for energy efficiency. “That is good investing sense. If we can contribute to the Dutch economy, then we will do it,” Mr. Lindeijer said.
Mr. Lindeijer added that PGGM is looking at core infrastructure investments, and has set up its own in-house team of 20 people to work on direct infrastructure deals.
PGGM also has responsible investment staff as part of the managing board for investments. “They have very stronger representation in the investment committee,” with different teams for asset classes, he said. “We are thinking maybe we should integrate this group now — for many years it has been separate. As we move from responsible investment 2.0 to 3.0, we are thinking ‘should we integrate the responsible investment staff into the separate departments?’ That is the struggle we are facing now as we want to integrate responsible investment into the investment process.”
