The Netherlands’ largest pension fund provider, APG Asset Management, is launching a line of index investments it describes as “baskets of shares in sustainable companies” in which pension funds can choose from different sustainability grades.
APG, which manages approximately €613 billion (US$724.4 billion) for 4.7 million pension fund participants, will launch five indexes within the iSTOXX APG World Responsible Investment Indices family in partnership with Deutsche Boerse-owned* index provider Qontigo and asset manager BlackRock. The iSTOXX APG World Responsible Index applies APG proprietary environmental, social, and governance (ESG) exclusion and non-ESG-leader exclusion screens to the parent iSTOXX World A Index.
The asset manager said that by the fourth quarter of this year €1 billion ($1.18 billion) will have been invested in the product.
Although the move into passive index funds is a first for the active investor, APG says it is not abandoning its investing philosophy, but is acknowledging that not all funds want the fees that come with active management. APG Asset Management Chairman Ronald Wuijster said the index investments are suitable for pension funds that are not of the scale that makes active investment attractive, but still want exposure to sustainable investments.
“We still advocate for a very active form of investment for those clients who have the opportunity to do so,” Wuijster said in a statement. “But that form also involves higher costs and is therefore only attractive from a certain asset size. Not every client has that size.”
However, he noted the sustainable index does have some active components, such as filters that can be placed based on the preference of the customer. For example, the first filter is an exclusions filter investors can use to exclude companies that do not meet certain sustainability requirements. And by applying up to four additional filters, investors can increase the sustainability content of their investment portfolio.
The five indexes being launched are the iSTOXX APG World-X Index, the iSTOXX APG World Responsible Index , the iSTOXX APG World Responsible Low-Carbon Index, the iSTOXX APG World Responsible SDI Index, and the iSTOXX APG World Responsible Low-Carbon SDI Index.
* Deutsche Boerse is a majority owner of ISS Media. CIO is part of ISS Media.