Hiring for sustainable growth: APG adds 3 to its expanding ESG investment team

Three new staff have joined the sustainability team at APG Asset Management, the wholly-owned asset manager of the giant €173bn ($231bn) ABP pension fund for Dutch civil servants, taking the team to eight under the management of Rob Lake, head of sustainability. The latest recruit is Claudia Kruse, who had been in charge of JP Morgan’s dedicated ESG research team since January 2007 until it was disbanded in December last year. Kruse was recognised as a rising star by the Millstein Center for Corporate Governance and Performance at the Yale School of Management for her governance research. At APG, she will focus on environmentally orientated corporate engagement and links between the sustainability skills and processes of corporate boards and governance issues. Rob Lake told Responsible Investor that APG would be expanding its engagement on environmental and board-level issues under Kruse, a seasoned professional, after its early engagements tended more towards human rights concerns: “This work is a recognition that if companies are going to take sustainability seriously then it has to be more integrated into what the company board does.”APG has also hired Sander Paul van Tongeren as a senior sustainability specialist for real estate as the fund manager broadens its green property research. Van Tongeren joins form ING Real Estate where he had been developing ING’s approach to green real estate. He will be embedded with APG’s real estate team when APG moves to a new building itself in Amsterdam in July this year. Lake said Van Tongeren would be looking at ways to understand and measure the sustainability quality of APG’s existing property exposure as well as looking broadly at market sustainability standards and practices in listed and unlisted real estate investment. Subsequently, he will start engagement with real estate funds looking at trying to improve their sustainability focus. Roderick Munsters, chief investment officer at APG, recently told the INREV real estate conference that the manager was planning a global sustainable property survey with the University of Maastricht. Munsters said the survey would cover both listed and non-listed property markets on a global basis, including office, retail, residential and industrial sectors. He appealed to other “like-minded” institutional investors to partner with
APG on the project, and said fellow Dutch pension fund giant PGGM was already on board. APG’s third hire, YK Park, was formerly a project director with the Association for Sustainable and Responsible Investment in Asia (ASrIA) and spent ten years as a sell-side analyst specialising in sustainability in Asia. She will be based in Hong Kong and firstly provide ESG research in Asia for equities before analysing fixed income, listed and unlisted real estate and infrastructure. Lake said: “In general terms we will be investing more and more in Asia and so we will be running increasing amounts of assets from Hong Kong. Disclosure will be one of the challenges here. Asia includes Australia and Japan, but it is primarily emerging markets, so we’ll be doing some work trying to find out about their practices on ESG and then we’ll start thinking about more engagement. There are also many sustainability-driven investment opportunities in both listed and unlisted assets in Asia.” Lake says APG has now made all its planned sustainability personnel hires, having almost doubled the size of the team in one go. The firm is both asset manager of the ABP pension fund and actively courts third-party assets from other pension funds. This makes for an interesting interview because under the Dutch regulations that allowed ABP to split out its fund management function, Lake cannot directly mention APG’s main client, ABP, by name! As an example of their separation, both APG and ABP will publish individual sustainability reports in May. Lake says sustainability is pitched highly in APG’s marketing, but is part of abalanced package of what the manager does: “We know our existing and potential clients are strongly interested in sustainability. Inherent in the investment job we do is the analytical embedding of ESG into the investment process in order to become a better investor, which also delivers other things that clients want, such as social responsibility. That’s part of the overall package we offer pension fund clients and one of a number of APG’s strengths.”

“There are also many sustainability-driven investment opportunities in both listed and unlisted assets in Asia.”

Alongside increasing commitments to the green investment space, APG has also been topping up allocations to microfinance and recently placed $40m alongside US pension fund TIAA–CREF in an $82m (€64.15m) closing of the Developing World Markets Microfinance Equity Fund I. Lake says APG now has $140-150m committed to microfinance funds, which it sees as attractive as a portfolio diversifier and long-term investment into markets that should over time become more attractive for more mainstream investments. While Lake says the manager doesn’t have a microfinance ‘target’, he says they are constantly looking for new opportunities to meet an overall commitment to increase the volume of investments in areas of high

sustainability value. However, Lake has regularly said that large numbers of the sustainability investment opportunities brought to the manager’s attention are either too small given APG’s scale (the cut-off is around $40-50m) or do not match APG’s risk-return needs. He adds: “We also see large funds that are brought to us that throw up other challenges. There aren’t many people bringing sustainability and renewable energyinvestments to us that have a really strong track record and can really convince us they are going to be able to deliver the deal flow in viable proven technologies with low enough risks. But the whole thing is that this is such a new area that it’s still a challenge. We are seeing product come through, but one of the good things at APG is that we can also structure these things ourselves such as the new China energy efficiency deal.”