PGGM sees “challenge” in meeting energy transition investment target

It was a year that saw a visit from a Sioux tribal elder and a Greenpeace protest at its offices: 2018 was quite a year in the responsible investment life of Dutch pension investment giant PGGM.

The Sioux visitor was Madonna Thunder Hawk, who visited PGGM and its parent, healthcare pension fund PFZW in October to ask for divestment of Transcanada, a company involved in the controversial Keystone XL pipeline.

PGGM explained that it has been slowly reducing its Transcanada stake as part of a phasing out of high CO2 intensive companies. [Shortly after the meeting, the construction of the pipeline was halted by a federal judge.] PGGM says it is also still engaging with Energy Transfer Partners, which is involved in the Dakota Access Pipeline (DAPL). Amid all this there was a protest by Greenpeace in July over such investments.

PGGM says — in its latest Responsible Investment Report – that it understands Greenpeace’s concerns very well, although it retains the investments to stop them falling into the hands of investors “with fewer objections to tar sands”.

But perhaps more noteworthy is that the influential investor says that it is finding it hard to find the large investments needed to meet the challenges to solve social and environmental challenges, particularly the energy transition.

For example, it has looked at investment opportunities in new technologies for storing and generating energy using hydrogen. A concrete example is its joint venture with Shell in energy company Eneco.

But it says it is “challenging to find the large investments that are necessary”.

PGGM has an assignment from PFZW to invest at least €20bn in such solutions by 2020. As at the end of 2018 it had allocated €14.5bn – and admits that it is “uncertain” that it can find enough investments to meet this objective.

“Many innovations are still in their infancy and do not carry enough weight and have too many development risks to invest in,” the report says. “It is therefore uncertain whether there will be sufficient investment opportunities in the coming period to achieve the target of €20bn in 2020.”The detailed 57-page report adds that the private equity team will start a new initiative to find investment within the themes of climate change, water scarcity, food security and healthcare.

“It is uncertain whether there will be sufficient investment opportunities … to achieve the target of €20bn in 2020.”

“The aim is to invest a substantial amount in funds and co-investments over the next 3-5 years,” the report says.

Other highlights:

• Killing two birds with one stone: projects to measure the social impact of medicinal products via engagement with Novartis and AstraZeneca. It also engaged with Novartis over a bribery scandal.

• In 2019 it will work on a new screening method for beta equity portfolios. “In 2018, we stopped using our best in class ESG inclusion method in the beta equity portfolios. This method proved not to be robust enough to achieve a cleaner portfolio and reduce reputational risks.”

• Development of an impact assessment model with UBS Asset Management, City University of New York, Harvard university and the University of Wageningen.

• Holding Daimler (maker of Mercedes) to account for cobalt. “Daimler was receptive to this dialogue, certainly because this cobalt engagement coalition represents many hundreds of billions of euros of invested capital… In 2019, we will continue to hold Daimler to account for its responsibilities in the cobalt supply chain.”

• Tax: “We are currently working on an additional sustainable tax policy that formulates our expectations with regard to the companies in which we invest. But also with regard to parties who are appointed to manage investments, such as external fund managers.”