ABP and responsible investmentRob LakeHead of Sustainability

Vereniging van Pensioenrecht, 4 March 2008

ABP - background

• Pension fund for employees of public service and education sector in the Netherlands

• €218 billion assets under mangement – 80% internally managed

• 2.6 million members – 1 in 4 households in NL

Strategic commitment

• Strategic Investment Plan 2007 – 2009:

‘ABP will explicitly integrate extrafinancial information in its regular investment process … to contribute to the realisation of the envisaged risk- return profile.’

• EU law on requires us to base investment decisions on partcipants’ financial interests

Why has ABP taken this step?

• Long-term perspective requires broader and deeper analysis

• Environmental and social trends affect business and investment

• Demonstrate investor responsibility

ESG in a €10 billion stockpicking fund

• Place ESG analysis alongside ‘conventional’ analysis• External research providers, sell-side, in-house• Dialogue with PMs to identify priorities and discuss

interpretation• No obligation on PM to pick ‘best in class’• Can choose not to invest – or to invest more or less

than we would otherwise do

A starting point for discussionWestLB

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Banco de Sabadell S.A. 3,98 3,98 - - - - - - - -  5.0  0Erste Bank der Oest. Spark. 3,32 3,07 BB CCC BB 4,2 4,8 1,3 4,4 B+  6.0  0Banca Popolare Italiana 2,53 2,53 - - - - - - - -  3.0  1Julius Baer Holding AG 1,96 1,96 - - - - - - - B++  6.0  0Enagas S.A. 1,65 1,65 - - - - - - - -  5.5  0Honda Motor Co. Ltd. 1,42 1,42 AA AAA BB 6,7 2 8,1 4,3 -  5.5  1Banco Espirito Santo S/A 1,43 1,37 BB BB BBB 4,8 6 3,2 4,7 A  4.5  1CapitalSource Inc. 1,33 1,33 - - - - - - - -  7.5  1Intesa Sanpaolo S.p.A. 2,16 1,23 CCC CCC CCC 1,6 1,5 0,9 0,4 B  6.0  0Societe Generale (France) 2,29 1,21 AA A AA 6,3 8,1 5,3 6,9 A++  6.5  0AXA S.A. 2,39 1,17 AA A AA 6,6 6,1 6,6 7,3 A+  7.0  0ABN AMRO Holding N.V. 2,24 1,08 AAA AAA AAA 9,4 8,8 7,6 8,1 A++  7.5  0Hellenic Exchanges S.A. 1,01 1,00 - - - - - - - -  2.0  0Tenaga Nasional Bhd 0,99 0,99 - - - - - - - -Prudential PLC 1,49 0,93 AA A AA 7 6,8 5,7 8,2 B+  8.5  0Nobel Biocare Holding AG 1,06 0,92 BBB BBB A 6 6,7 5,3 2,6 A  6.5  0Natixis 0,88 0,88 - - - - - - - -Synthes Inc. 0,93 0,82 BBB A BB 3,3 5,3 5,8 5,4 B+  4.0  2Banca Monte dei Paschi di Siena S.p.A.0,94 0,82 A A A 6,7 6,2 5,8 5,8 A+  4.5  0Mediobanca Banca di Cred. Fin. 1,00 0,81 CCC CCC CCC 1,7 3,4 2,1 2,5 B  3.0  1Itron Inc. 0,77 0,77 - - - - - - - -  7.5  0Elisa Oyj 0,83 0,75 B CCC B 3,7 3 2,4 6,3 B  6.0  0Panalpina Welttransport 0,72 0,72 - - - - - - - -KBC Group N.V. 1,03 0,63 AA AA AA 6,7 7,3 6,6 7,2 A+  7.0  1St. Jude Medical Inc. 0,62 0,62 CCC B B 2,3 3,7 3,6 2,6 -  6.5  0Nifco Inc. 0,59 0,59 - - - - - - - -Novartis AG 2,85 0,54 AAA AAA AAA 8,7 7 7,1 8 A++  7.5  0

Portfolio Innovest GMI

International standards• Expect companies to follow United Nations Global Compact, the

OECD Guidelines for Multinational Enterprises, the OECD Principles of Corporate Governance and the International Corporate Governance Network Statement on Global Corporate Governance Principles

• Engage with companies whose practices fall short of these standards

• Withdraw our investment from companies that persistently fail to improve their practices

• Developing work programmes on GC/OECD compliance, climate change and labour standards

Invest in sustainability solutions

• Carbon funds – €500 million* projected CO2 reduction of 75-80 m tonnes 2008- 2013

• Clean technology private equity - €250 million• Renewable energy infrastructure – €100 million• Sustainable forestry in Mozambique - €60 million• Microcredit - $20 million

Alternative Investments

• Developing systematic processes for Alternatives• Infrastructure – sought information from manager on

Equator Principles• Forestry – prefer FSC certification wherever possible• Carbon funds – caution on CERs from palm oil

Corporate governance and voting

• Exercise voting rights wherever possible • Recall all lent stock for all Dutch companies, all

significant holdings, and special situations• More active engagement under development• Dutch and international partnerships

Engage with policy-makers

• In our interest to promote sustainable business and good corporate governance in the market as a whole

• Bali communiqué on climate change• Dialogue with regulators on corporate governance

codes

Exclusion

• Values and opinions in society – and among ABP participants – differ widely: e.g. on arms, tobacco

• ABP needs clear, non-arbitrary reference points for decision-making

• Policy is based on Dutch and international law• Exclusion of companies that make antipersonnel

landmines, cluster bombs or chemical/biological weapons

Partnerships

• Carbon Disclosure Project – signatory and member, and supporting Dutch extension

• UN Principles for Responsible Investment• Institutional Investors’ Group on Climate Change• Enhanced Analytics Initiative• Eumedion• International Corporate Governance Network

Transparency and accountability

• Publish full list of listed equity holdings; include bonds from May 2008

• Will publish first Responsible Investment Report in May 2008

• ABP will publish first CSR Report in May 2008 (GRI Guidelines)

Overview• Integration of ESG into all investment processes• Expect compliance with international environmental

and social standards (UN, OECD)• Active and responsible corporate governance• Invest in sustainability solutions• Engage with policy-makers• Exclusion based on Dutch and international law• Transparency and accountability