Sustainability considerations are being increasingly integrated into APG Asset Management’s investment approach, according to Eric Van der Maarel, chief executive officer of APG Asset Management’s Singapore branch.

Amid evolving market conditions and a shifting economic cycle,
such integration will foster resilience and diversification, Van der Maarel said at a panel discussion at AsianInvestor’s Investment Strategy Summit on May 7 in Singapore.

“What you’ve seen over the past two years is that our priority in terms of maximising returns, and having a real sustainability footprint as a firm, has really increased,” Van der Maarel said.

“I would say they’re almost on an equal footing in terms of priority. And that means that in some cases, we are also willing to sacrifice some return in order to take on social responsibility as a pension fund.”

SHIFTING FOCUS

This shift in investment priorities by the $606-billion pension investor reflects a broader trend in asset management where environmental, social, and governance (ESG) factors are becoming as critical as financial outcomes.

APG’s approach to investments that prioritise social impacts, such as affordable housing projects in the Netherlands, offer moderate returns while addressing critical social needs, said Van der Maarel.

“Investing in social housing may not yield your 10%, but it may be up to 5%,” he said, underscoring the trade-offs sometimes necessary to achieve broader societal benefits.

“If we would actually allocate to similar assets, for example, in Asia, we would probably achieve higher returns,” Van der Maarel explained. “But in the Netherlands, we have a real housing problem, an affordable housing problem, where there might be up to eight people competing for one available place to live in.”

“These projects illustrate our commitment to fulfilling the needs of pension participants while also achieving sustainable growth.”

APG’s investment philosophy and asset allocation strategy puts emphasis on the firm’s long-term perspective and the importance of alternative assets.

“Given that we have such a long-term horizon, we have about $150 billion invested in really deep alternative assets in terms of real estate, infrastructure, private equity, natural resources. This is a very high and well-yielding part of the portfolio,” said Van der Maarel.

APG aims to drive the global energy transition by investing in real assets that harness sustainability and circularity megatrends while generating returns.

“I think there’s a perfect balance there in terms of financial return and social return that we’re achieving,” said Van der Maarel.

STRATEGIC PARTNERSHIPS

APG has a preference for a strategic, long-term outlook over short-term adjustments, according to Van der Maarel.

“The minimal role of tactical shifts in APG’s overall strategy due to our significant asset size and long-term liability framework, allows us to make more substantial and impactful investments,” he said.

He also highlighted the importance of strategic partnerships, especially in infrastructure investments, as a means to access larger-scale projects that promise long-term returns with less competitive pressure.

“We like bigger size projects and teaming up with like-minded funds,” he said.

APG recently announced the launch of its asset owner co-investment fund, which has a primary objective of providing exposure to global non-listed infrastructure investments across various asset styles, sectors, and regions over a long-term horizon.

The pension fund investor has already announced partnerships with several prominent asset owners, including Japan’s Government Pension Investment Fund (GPIF), Korea’s National Pension Service (NPS), and New Zealand’s Superannuation Fund.

ASIA ACTION

Asia’s rapid growth and wealth accumulation make it a prime destination for APG’s future investments, particularly in the alternative assets space, said Van der Maarel.

“I believe that the firm’s current allocation of just under €30 billion in Asia is too low,” he said.

The firm’s presence in Singapore and Hong Kong ensures that the fund remains close to the deals and can actively participate in the growth story of Asia.

“The fact that we are here in Asia, close to our investments, is going to be very important, not only for risk control but also because our portfolio managers are on the boards of the companies that we invest in,” said Van der Maarel.

“Governments in Asia cannot, by themselves, invest in building the infrastructure that is needed to support all the growth and wealth creation that we have here,” he said.

Van der Maarel revealed that its main client ABP, who accounts for 92% of APG’s assets under management (AUM), has set aside around €30 billion to allocate to impact investments over the next few years.

“Ten billion euros is going to Dutch-centric investments, again, with that social focus given where our key stakeholders and pensioners are, and €20 billion will be allocated to the rest of the world, and I can say that Asia will be a major recipient of that as well.”

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