PGGM Experts Discuss Balancing Risk, Return, and Sustainability in Investments

PGGM's investment strategy now incorporates risk, return, and sustainability as core pillars in decision-making.

Sander van Stijn, Head of Mandate Management, and Colin Tissen, Sustainability Lead at PGGM, discussed in the "A Sustainable Future" podcast how the organization transitioned from a traditional two-dimensional model (risk and return) to a three-dimensional approach. This shift represents a significant re-engineering of capital allocation, team organization, performance measurement, and accountability.

Van Stijn detailed how feedback from PGGM's clients, particularly those in the healthcare sector, was instrumental. Clients consistently raised concerns about the societal impacts of certain corporate behaviors, such as tobacco or other negative externalities. Historically, PGGM integrated sustainability by excluding certain companies, tilting index portfolios towards lower carbon emissions or positive alignment with Sustainable Development Goals, and allocating small satellite portfolios with specific sustainability objectives.

The move towards a more intentional investment approach also required a deep re-engineering of organizational culture and incentive structures. The discussion highlighted challenges in embedding sustainability across all investment teams and moving away from a centralized responsible investment function. Achieving sustainability goals also necessitated changes in governance and compensation structures.

Jason Mitchell, Head of Responsible Investment Research at Man Group PLC, moderated the discussion. He emphasized that the transition from intention to implementation in sustainable investing is a complex process, requiring more than philosophical contemplation. Concrete implementation within investment frameworks is crucial.