PGGM teams up with Rotterdam University to measure social impact of ESG investments

Pension fund manager says social impact methodology could help measure benefits of its €2bn targeted ESG strategies.

PGGM, the €99bn Dutch pension fund asset manager, has kicked off a major research programme with Rotterdam University that aims to measure the ‘social impact’ of its growing portfolio of targeted ESG (environmental, social and governance) investments. Calculating the sustainability ‘value’ of ESG related investments has become increasingly important to institutional investors as they look to justify both the financial and social benefits of responsible investing strategies. PGGM, which runs the bulk of its assets for the Dutch health care pension fund, Pensioenfonds Zorg en Welzijn, plans to extend one of the world’s biggest sustainability-driven investment strategies – its responsible equity portfolio – to some €2bn by the end of this year. Saskia van den Doel, a member of the Responsible Investment team at PGGM, told the TBLI conference in London last week that its work with Rotterdam University would cover its targeted equity fund investments, including microfinance: “We want to measure the social impact of our investments. We don’t want to compare asset classes, but we do want to be able to compare what happens when we change the nature of an investment: say for example green energy versus traditional energy sources, and be able to seewhat that means and benchmark it. Fiduciary duty is first and foremost to us, but we always want to make informed decisions. The social impact methodology could help us with this.” PGGM’s strategy in targeting specialist ESG investments is to seek out innovative, externally-run investments where sustainability is a clear potential driving factor of returns. Examples of its existing targeted ESG investments include a €250m commitment to the Climate Change Capital Carbon Fund and €242m to GMO’s Long Horizons Forestry Fund. The manager has also invested €16m in the development of biogas plants in Germany and solar energy in Italy. A further allocation to Albright Capital Management aims to target emerging market investments based substantially on ESG factors and actively seeks to improve companies’ behaviour and local regulations.
The Dutch pension fund asset manager has also been a major investor in microfinance, including last year’s cornerstone investment of up to $60m (€43m) in a global microfinance equity fund run by Grassroots Capital, the New York, London and Hyderabad-based manager, as part of a massive €200m programme started in 2008 to invest in both microfinance debt and private equity.