After an eventful year, it is time to look ahead to 2022 and beyond. We look ahead with much uncertainty. The Russian invasion of Ukraine on February 24 marked a serious escalation of the Ukraine crisis. While the continuing tragedy will undoubtedly harm the global economy, the consequences will depend to a large extent on the sanctions imposed in response to the conflict. The heavier the sanctions, the greater the economic impact. For pension funds and thus also for our clients, it means that they will experience a negative impact within the investment portfolios as a result of worldwide deteriorating stock market prices. In addition to the risk of energy price increases, there is also the risk of energy shortages occurring. This can lead to lower GDP and higher expected inflation. The risk of the aforementioned movements on our business operations and on our financial position is limited. Nevertheless, we follow the developments with the highest urgency.
Although this crisis casts a shadow, the return to the office at the beginning of March was nevertheless a positive moment for us; it was very enjoyable to be able to meet colleagues in person again after a long time. For the largest part of the past two years we have worked from home to prevent the spread of the coronavirus. Although the service to our clients continued unabated and we had a good financial year, we are looking forward to working at the office more often. In 2022 we will combine home working with physical meetings in the office.
Sustainability is and will remain a major priority for PGGM Investments. With increasing societal expectations and scrutiny of our investments (eg. fossil fuels, Russia), the impact dimension -besides risk and return- is steadily becoming more prominent. Questions are being raised whether index investing can keep up with fast-shifting conditions and concerns among stakeholders and participants, and provide for the accountability for real-world outcomes they require.
It has become clear that the non-financial data infrastructure must be reinforced in order to truly integrate the financial performance and sustainability of our investments, whether active or passively managed. In 2021, necessity and opportunity conspired with EU transparency and compliance requirements (SFDR) and standard- setting breakthroughs (notably the International Sustainability Standards Board under IFRS). These developments will accelerate several projects to deliver on PFZW policies to reduce CO2, increase SDG impact and mitigate negative impact through ‘smart’ engagement and divestments. Increasingly, these policies and instruments aim for outcomes, ie. the real-world difference PFZW makes with the pension savings of its participants. With PFZW’s new fossil policy, we are entering a new era. In the benchmark investments in particular, we are now going to deviate significantly and have announced in advance what we are going to invest in through engagement, including timelines. That requires more commitment, more transparency and accountability and proactivity.
As PGGM Investments, we must continue to comply with all legal and regulatory requirements. For 2022, there will be an extra focus on the implementation of Level 2 of the SFDR and the sustainability related adjustments to MifidII and AIFMD. Transparency remains important to PGGM, not only for accountability, but also for moving the broader industry towards a more sustainable world, together with our clients.
The PFZW decision to discontinue its investments in the PGGM funds in order to be more agile and in control of its investments, impacts PFZW, as well as PGGM Investments and our other clients. In 2022 we are focuses on executing this decision and realising an optimal structure while ensuring a fluent transition of our clients to their new fiduciaries.
In addition to implementing our clients' investment policy, 2022 is also about developing a long-term strategy. In 2022 we will translate our long-term vision (Vision 2030) into an actionable strategy and start to deploy this strategy. We refer to our 2030 investment approach as “sustainable value creation”, i.e. investment management aimed at achieving a good financial return through long-term value creation, offering a positive contribution to society and the environment. Our investments yield a financial return, contribute to the great global transitions and visibly impact the topics our participants feel are important.
This will, more than ever before, require an organisation able to identify and capitalise on the opportunities this brings, both in a top-down, as well as a bottom-up sense. That process sees the individuals and the teams involved become the bearers of the success attained. This requires our organisation to adopt a culture and employ the professionals that will match that. Innovative and entrepreneurial spirit is needed to prepare for the future. Experimenting with new behaviour is an absolute precondition for achieving greater entrepreneurship and decentralised responsibility.
Also, our 2030 strategy requires looking more from the outside in, embracing technological developments more quickly and co-operating even more with partners. In order to remain relevant, it is important for PGGM to continue to provide excellent services for a competitive fee.
The investment process needs to be redefined to invest more from a total portfolio approach and there is the accelerated digital transformation. We will continue to work on cost-efficiency initiatives and continue our initiatives to prepare for the implementation of pension reform in the coming years. We will also continue to explore new opportunities to support the healthcare sector with our financial expertise and possibly assets.
In 2022, the ideas of Besturing 2021 will be further developed. The new insights arising from the programme will enable us to act even more so than before in accordance with our integral responsibilities. In doing so, we are transforming PGGM Investments into a fast, adaptive organisation that is ready for the future.
- Stable financial results
- Asset management
- How our clients’ investments contribute to the SDGs
- How we mitigate our negative impact
- Active ownership
- ESG integration
- Optimal risk management of investments
- Dealing with climate risk as financial risk
- Enterprise Risk Management