Roelie van Wijk, Chief Executive Officer of TKP Investments, a subsidiary of Aegon Asset Management in the Netherlands and Coos Luning, Chief Investment Officer at TKP Investments, explain the steps Aegon takes to ensure responsible investment extends beyond our four walls.
How do you choose third party asset managers?
Coos: It's not about making choices based simply on past performance – we pay a lot of attention to qualitative aspects such as culture and organization. We will only select an asset manager that clearly puts their clients first, and focusses on longer-term investments. But we also want diversification – we like to see a mix of asset management styles as this ensures we have a better overall risk and return profile.
How does Aegon ensure that third parties follow its commitments, such as Principles for Responsible Investment (PRI)?
Roelie: Many years ago we discussed with our clients what they consider to be the most important Environmental, Social and Governance (ESG) themes. We concluded we should exclude certain investments, for example in controversial weapons, and focus on others through engagement. We provide the exclusion list to our external managers and have set up structures to ensure it is implemented.
Coos: We have numerous tools and processes to help us with ESG. One of these tools helps us to identify names in the portfolio that are 'red alerts'. This is helpful in generating discussions with the asset managers about the names they have selected for the portfolio.
Is exclusion the main tool you use?
Coos: In total, only about 3% of potential investments raise questions of exclusion. It's also about finding managers that use ESG as a way to generate better returns for their portfolios. For example, if an asset manager can see evidence of excellence in governance in an enterprise, then that is a direct pointer to an organization's commitment to its people, customers and shareholders. Good governance is the bedrock of responsible investment.
What's the best way to discuss ESG with third party asset managers?
Roelie: A mixture of formality and transparency. ESG is always part of requests for proposal when we approach external managers, as it has been when clients selected us as their fiduciary manager. We also scan the asset manager's portfolio using the Morgan Stanley Capital International (MSCI) database, to see how their portfolio scores on ESG, and then challenge them on this. We always have one or two companies on our list when we meet with them, and will ask: why are you invested? Can you give us your reasoning?
How has a commitment to Responsible Investment (RI) helped you as a company?
Roelie: There are only about 85 of us altogether, so we are a fairly tight team. I think a commitment to RI does affect an organization. We also look at it broadly: as real estate investors we are active with the Global Real Estate Sustainability Benchmark; we have a group looking at community involvement, and so forth. As investment professionals, we share ideas and experiences around the coffee machine about the positive impact of ESG on returns. And while doing so, it's good to know that our coffee machine is supporting fair trade coffee production.
