“You can invest in a sustainable and responsible way and keep sound returns so you can maximize returns and be sustainable [financially].”
Gert Dijkstra is Senior Managing Director at APG Asset Management, responsible for Global Networks and Peers and for Investing in the Netherlands. Formerly he was Chief Strategy & Communication and member of the Board at APG Asset Management.
More and more, asset management companies are placing an emphasis on investing in socially responsible companies. APG created GRESB, standing for Global Real Estate Sustainable Benchmark, now used by over 180 asset managers. This measures responsible environmental behavior like energy and water reduction. Pension fund management companies are beginning to collaborate in order to streamline the ability to evaluate and monitor institutions’ commitment to key environmental factors like carbon reduction. “We can report on listed companies with regard to their sustainable development goals and results.”
Adherence to ESG commitments involves communication with clients and shareholders. Five-year sustainability goals are set and these standards are weighed along with likelihood of investment returns. 20-30-year targets are also overlaid in building a global portfolio aligned with long-term ESG goals.
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SPEAKER
Gert Dijkstra
Senior Managing Director
APG Asset Management
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
Rachel Pether: (00:08)
Hi everyone. And welcome back to SALT Talks. My name is Rachel Pether and I'm a Senior Advisor to SkyBridge Capital based in Abu Dhabi, as well as being the MC for SALT, which is a thought leadership forum and networking platform that encompasses business technology and politics. Now SALT Talks, as many of you know, is a series of digital interviews with some of the world's foremost investors, creators and thinkers, and just as we do at our global SALT events, we try to empower really big, important ideas and provide our audience, the windows, the minds, and subject matter experts. Today's focus will not be on the US election. And as our producer, Joe said, "you can think of this as a bit of a palate cleanser from the news for the last few days," but we will be focusing on pension funds, sustainable investing and partnerships. And I'm very excited to be joined by a dear friend of mine, Gert Dijkstra. Gert, is a Senior Managing Director at APG Asset Management.
Rachel Pether: (01:08)
Which is one of the world's largest pension investors. He's been with them for over 12 years and he was a member of the board from 2010 to 2017. He was previously with ABP, which is the pension fund for government and education employees in the Netherlands. Gert studied business management at the University of Copenhagen. And has does further education at [inaudible 00:01:32] NCF/NCA and Harvard Business School. He's also a frequent speaker at high profile events globally, as always, if you have any questions for Gert, please just enter them in the Q&A section of your zoom screen. Gert welcome to SALT Talks.
Gert Dijkstra: (01:49)
Thanks.
Rachel Pether: (01:51)
Now tell me a bit about your background. You're obviously Dutch and you have a very unpronounceable name. So I apologize if I did not get that correctly. But tell me a bit about your personal background and what took you into the world of pension funds investment.
Gert Dijkstra: (02:06)
Yes. Okay. Well, Rachel, thank you very much for this introduction. And the pronunciation of my name was brilliant. Thank you for that. Indeed, I'm Dutch, I'm was born and raised in the Netherlands. And interestingly is that often when, such a question is asked, people start talking about their career and what they're doing and the importance of their firm. But thank you for the opportunity, first of all, for yourself and SALT and SkyBridge for having me. I'm currently in the past several months, working from home and that makes it, well, you might say, we look at a different way to this world and your life. I don't know how you all experienced that, but, several months working from home is interesting and give you food for thoughts. So one of the things I did for instance, is I picked up is play golf, again.
Gert Dijkstra: (03:06)
Instead of commuting for one and half hours from where I live towards my Amsterdam office. I have ample time to try to improve my golf. So that's one interesting thing here, I've learned you can shift your time to interesting things. Next to that, I must admit it's challenging to get used to have just one door between your professional work and your family office. You might say you're working, living with your family. And so often that's interesting to have to get a morning coffee, but it's also challenging to, in the evening, get away from your work and things like that. So my life has changed. As you rightfully mentioned, I studied at University of Copenhagen, did an MBA over there, worked around in consultancy, different consultancy firms for, let's say 10, 15 years doing different things, marketing strategy, [inaudible 00:04:15] M and a.
Gert Dijkstra: (04:15)
And I ended up, one and a half decade ago a bit more than that ,in the investment environment and institutional investment environment for large Dutch pension funds, which gave me an opportunity, to fill in different roles, have different challenges. And... But also to travel around a lot, also driven by having offices in New York, in Hong Kong and since not long ago in Beijing as well. So that's a bit of my life plan and I'm looking forward to the coming season because I am an [inaudible 00:04:55] energetic skier, but currently it's pretty challenging to leave the Netherlands and travel to Austria, for instance, where we often go because of the COVID measurement. It's challenging to plan your ski holiday. So I do hope we mostly go, around Christmas but currently the chances are low that I will be skiing during Christmas. So that's an introduction Rachel.
Rachel Pether: (05:25)
That's a great overview. Thanks so much Gert. And if you've just taken up playing golf, then we should probably have a game, because I'm probably at your level. So it'd be nice to play with someone that's as bad as me.
Gert Dijkstra: (05:35)
Love do to it.
Rachel Pether: (05:38)
But you mentioned your global mandate, and I want to dive into that a bit deeper later on, but the benefit of those in the audience that don't know much about APG Asset Management, Could you give an overview of the company as well?
Gert Dijkstra: (05:54)
Yeah, sure. Love to do that. Well, APG Asset Management, let's start with a bit of history. At one hand, we are very old firm, founded in 1922 when the Dutch government, started a pension fund. So in many years [inaudible 00:06:14] my view it happened nothing until 1996 when the pension was privatized. And then you suddenly see that, there is a broad mandate. You see a lot of new asset classes being introduced, going global. And when I started to run somewhere in 18 years ago, we already were into New York, North America, fixed income, real estate, going into private equity, hedge funds, commodities. So that was a really interesting period of time. In 19- Sorry, in 2009, the Dutch government introduced a new law and the Dutch pension funds has to be split into the pure pension fund and the executing asset manager.
Gert Dijkstra: (07:05)
And that point in time, APG was founded and currently APG Asset Management is the asset manager for four Dutch pension funds of which the civil servant educational pension funds ABP is by far the largest. The second largest one is the pension fund for the building construction industry. And I mentioned those two because they are also next to that they are our biggest clients. They're also our shareholders. So I live in a very interesting environment where my clients are also my shareholders. I maybe touch upon that later. Currently, at least at the start of 2000 to 20, we had around 540 billion euros assets under management. In US dollars, that's around 635 billion, I think. So I mentioned that because that's ranked us in the top 10 of pension funds globally. And I think we are characterized as a global leading, long-term and responsible investment.
Gert Dijkstra: (08:14)
And the responsible part I'd like to elaborate certainly later on. An important characteristic is that we have a large staff, 900 people working for us. So we have a 75% of the assets we have mentioned, we manage internally for the other 25%, obviously we select and monitor external managers. We are an active asset manager in the sense that we don't believe in standard commercial benchmarks, but we do believe being smarter than the market in the long term. Again, I already mentioned 900 people working from the Netherlands from New York, Hong Kong, Beijing. And we embrace typically the responsible and sustainable investment beliefs of our clients and ourselves. So that is, I think in a nutshell, what APG management is.
Rachel Pether: (09:13)
That's a great summary. Thanks Gert. And when we look at the sovereign wealth fund and pension funds world by far two of the largest themes or trends that we're seeing, the move to sustainable investing or the increase sustainable investments, but also the rise of co-investments and club deals between other asset owners. Is this something that you're seeing in Holland and with APG specifically?
Gert Dijkstra: (09:44)
We don't always see it, but we initiate it, I tend to say. It's not a new tendency, you're rightfully mentioned that as an important tendency in the world of large institutional investors. And I remember that I think already 2018, or even earlier, Texas teachers had in their strategy... So Texas teacher pension fund, had their strategy already, [inaudible 00:10:19] property/partnering/partly ordering asset, another part included and there's a beautiful Harvard business case on that. If you like to read more about that, but having said that it's typically a tendency, we already have had in, especially investigative real assets for quite some time, but it also picks up or in other areas. And also from an academic point of view, it's interesting to read some of the work of,[inaudible 00:10:47] as the monk from the Stanford University was privileged quite a lot of it, very interesting and relevant research on networks in the financial sector.
Gert Dijkstra: (10:58)
Having said that, for us we focus on, let's say five pillars, which are part of our asset on the property initiative. And if you look at our strategy, this asset on the [inaudible 00:11:13] property is typically, well needed for, as part of our strategy. The first pillar of that is boosting returns. Typically, if you look at the future, compared to what we could return in the past decade, it is far more challenging to find the same level of return. To find access to an objective yet difficult to implement long-term investments, it's partly is... Well, a very good option. And I think it's interesting example of that is that we collaborate and it's public information. We collaborate intensely in the past year with South Korean funds, NPS, we already did two deals together.
Gert Dijkstra: (12:11)
One toll road [inaudible 00:12:13]in Portugal, a student housing, real estate in Australia and those are typical, examples of too large asset owners collaborating. And this is an example where we talk about two pension funds investors, but you see that we collaborate with several wealth firms. A good example is that we already for long time, together with GIC from Singapore invest together. That's public information as well. But what's new is in the past, let's say two to three years. We talk also with [inaudible 00:12:53] family offices, something I wouldn't have done a decade ago, so everywhere where you see long-term and responsible investors and investment ambitions, large institutional investor find each other. So the first reason to do that is obviously boosting returns. The second important reason to partner with other asset owners is lowering costs.
Gert Dijkstra: (13:21)
So try to find cost-effective in direct investment in for instance, in real asset, but also cost sufficient to deal sourcing or processing and even negotiating fees. You might see as part of the agenda of the cost reduction part of asset owner partnering. Then the third important driver for this standard scene of asset on the partnering is to have more impact, more responsible investments impact. So more control over investments, more increasingly applying all aspects of responsible investing. Let me give you two examples. We were one of the founding members of a benchmark called GRESB G-R-E-S-B. That stands for Global Real Estate Sustainable Benchmark. And that is currently a benchmark used by around 180 asset managers and investors to monitor and report all their real estate investments. And it's typically geared towards reducing energy usage, reducing water usage, things like that.
Gert Dijkstra: (14:42)
As a next step, we also try to develop a lookalike benchmark for infrastructure, which is a bit more challenging. And another example, I'd like to mention to you is a very recent initiative, which we took together with another Dutch pension fund investor called PGGM, but also with Australian pension funds, AustralianSuper, and the Canadians British Columbia, which is an initiative for a... What we call AOPFGI,[inaudible 00:15:15] a platform where we can report, what I'd say, source data and report on listed companies with regard to their sustainable development goals and results. If, for instance, in carbon reduction, that's a new example. So there's typically something we need the partnering with large global investors to set standards in that area. Fourth reason you might say driver for cooperation without a large long term investors is obviously to share ideas on innovation.
Gert Dijkstra: (16:04)
We share our ideas with some of the large investors, sorry, to see whether or not we can jointly, initiative innovative pilots. We do that to go to together with beside parties, but also with cell sites, commercial parties like JPMorgan. We did artificial intelligence pilots with regard to sentiment recognition in the publications of central banks. So basically we don't have enough budget to do it ourselves, but if you share your budget, you can do far more innovative work than when you do it alone. And if you allow me the last fifth and last driver for accepting the partnering, for us is, human talents. What we try to do is to offer, let's say our professionals, which somewhere between mid thirties and mid forties to pick up some experience abroad with one of our peers.
Gert Dijkstra: (17:24)
And there's typically the period in most careers where you're not yet at the highest management level, you have had your university follow-up posts, academic experience, and you're looking for something new. So being able to offer young professionals in that age category to have one year in Japan or Korea or in China or in North America. That is a typically a benefit as well, becoming an attractive employer. So that is more or less the scene behind our ambition to implemented an asset partnering program.
Rachel Pether: (18:14)
I think that all those five points obviously really makes sense. I'd want to pick up on the third one that you spoke about and delve deeper into the impact side. And, ESG becomes such a highly used, or some would say overused acronym and can take on many different forms. Can you maybe just outline how APG actually views sustainable investing? And also I'd like to... You mentioned that your clients are also your shareholders and maybe how that plays into the equation there as well.
Gert Dijkstra: (18:51)
Yeah, well, we'll pick up the last part. Yes, we are obviously very close with our clients because they're our client and shareholders. So if you're talking about target setting and investment beliefs, it's always very dear. You might even say that it's an iterative process where we advise our client, and the client comes back. And so does that [inaudible 00:19:19]. So if you look at our investment beliefs, one important investment belief obviously is that we truly believe, and there is also sufficient economic research for that, that you can invest in a sustainable and responsible way and keep sound returns so you can maximize returns and be sustainable and disposable at the same time. That's a strong belief. And again, we have done some academic-
Gert Dijkstra: (19:51)
In the mean time, we have academic research sufficiently to[inaudible 00:19:55] indepen that belief. So if you try to translate that belief into policy and practice, you might say we have and it differs to be honest on the E environment. Yes, the social and the governance part. But do we have, let's say five parts of our policy, which well, give contents to that belief. First, well, we have a good governance policy. I like to elaborate on a little, we talk about exclusion about inclusion, and that's the most interesting part I like to share with you more elaborate. So say a little development investments and carbon footprint or climate as a theme.
Gert Dijkstra: (20:43)
What's important for us is that we typically start with the targets of our clients. Our client has very clear given us a very clear targets. They already did that for the period in time, 2016, 2020. So basically your question is very well timed because we start with a new set of targets for 2025 and targets for 2055 is in the listed equity environment. 40% carbon footprint reduction in the listed equities, and that's the benchmark is by the way, 2015.
Gert Dijkstra: (21:30)
So that's the baseline, but still challenging. The number two, another example of the targets of... Or really a quantitative target is that we have to invest 50 billion euros in clean, affordable energy, which by the way, is directly related to one of the sustainable development goals for the past agreements, for the specialists that sustainable development goal, number seven, clean and affordable energy. We have to reach that target by 2025. Then an interesting one might be the phase out for coal and tar sense from our portfolio also by 2025 or earlier. And then we have to find the portfolio fully aligned with the past agreement by 2030 and more challenging. And I'm not sure whether or not I will be still an APG Asset Management and net zero ambition portfolio by 2050. So those five very clear quantitative targets drive our policy and investment decision-making.
Gert Dijkstra: (22:46)
And obviously, we can't do that without clients having those type of ambitions. Having said that,[inaudible 00:22:56] adults are actually very challenging to implement that, but that's what we do. And that implies that in each and every investment decision we make, and I gave some examples in the listed of equity, with the same goals for real assets that we make our decision from four angles, obviously from a return angle, obviously from a risk angle, cost angle, but certainly also from the ESG angle. And they all have the same wage for a decision to be made yes or no to a investment proposition. So that's the way we translate, I believe towards targets, towards implementation.
Rachel Pether: (23:48)
That first one that you mentioned Gert, the 40% carbon reduction, do you apply that on a global basis across listed equities? Or how does that work?
Gert Dijkstra: (24:00)
Yes. It's very clear that at the end, it's for the global portfolio and it's a very, very interesting topic you now bring up, because for instance, when I mentioned there is a difference in base between [inaudible 00:24:15] EDA S G. When I take governance in Europe, it is the [inaudible 00:24:22] Anglo SEC's rules you might say, but certainly Europe, we have an increasingly intensive dialogue with the boards of the corporates, the listed corporates in which we invest. To steer them towards a more ESG, if necessary, more ESG like policy.
Gert Dijkstra: (24:46)
We experienced... So we have in Europe, for instance, a focus Europe portfolio equity portfolio with an increasingly, limited number of companies, because it's very labor intensive to have all those [inaudible 00:25:03] islands. So one of the effects you see, is that the number of companies you invest in decreases but at the time invested increases. In China, we now implementing a China focused funds that goes to say a limited number, but you see there that at an E, at environment and social, it works, but governance is quite a new topic for the boards of some of the Chinese listed companies. So there, you have to take more time before you are successful implementing your policy.
Rachel Pether: (25:42)
And we've had a question coming in from the audience. It's similar to a question I was going to ask, but they've actually worded it much better. So I'm going to select their version that said, "why do you think it's often the Dutch and the Scandinavian pension fund is leading the way in ESG and impact investing? Do you think it's a socially driven viewpoint, or is it also tied to the political stance?"
Gert Dijkstra: (26:09)
Well, that's indeed a very good question. And to be... My easy answer would be, I don't know. But when I think about it and often we are challenged to think about it because our Canadian peers often talk to us and call us, the enlightened Europeans that we are obviously very proud, but we'd also... You can also start thinking about why the heck is that... They are doing that, but you're talking about the Scandinavian when one of my dear peers is a Norwegian [inaudible 00:26:41] oil funds. So AND BIM, Norges bank investment managers, and that is typically a fund where there is a strong political connection historically. And I can't imagine that you see they're more political influence than in some of the other pension funds. For the Netherlands, I must say that there is not a strong or any, if you like political connection.
Gert Dijkstra: (27:13)
So then you can come to a discussion about the [inaudible 00:27:19] Anglo-Saxon world and the Rheinland model. So the [inaudible 00:27:22] and the Rheinland model, and when I was at a university [inaudible 00:27:26] in his town of which name you pronounce brilliantly. I was educated with a strong shareholder focus, but looking at my library, I find by all the old books on shareholder value, shareholder value, shareholder value. Still, the Netherlands is at the brink of the Rheinelands and the Rheineland model. So I think we picked up earlier from an academic, maybe full of societal, and maybe even from a political angle. So flavor of the movement early from shareholder towards stakeholder movement and modeling and thinking. And if I look at the board members of my largest clients, so being the Dutch pension funds, they want to be part of the Dutch society.
Gert Dijkstra: (28:20)
They want us to focus on our role in society. So, yes, that's, maybe a bit of no answer, but I do think that if you're in Europe, that might be a bit earlier influence of societal, or if you like stakeholder thinking that it might be in other parts of the globe. What's interesting for me is that we had... We also, here, we have had a fierce discussion some years ago. Was regard to the tension between return focus and which is part of your fiduciary duty or which is rooted in the prudent person rule and whether or not you could broaden your scope towards ESG, so sustainable and responsible investing. And at the moment that there is sufficient academic research and prove that you can do both.
Gert Dijkstra: (29:29)
So being a responsible and a sustainable investor without losing return. That's the solution, that's the way forward. And we had some enlightened CEOs and leaders here at Western Europe who brought us all that route. And I see the same by the way, and some of the same sinking and some of the US-based large venture funds in terms of the Californias,[inaudible 00:30:02], et cetera, who do a pretty much the same thinking as we do. So it's not any more, the enlightened Europeans, I must say. So I am not sure whether or not I answered the question, right, but that's some of my thoughts about it.
Rachel Pether: (30:18)
I think that's very explanatory. And if you do look at the academic research, which shows that sustainable investing actually leads to greater returns, you're doing a fiduciary disservice by not investing sustainably, and you can almost flip that around. You do mention US pension funds, and we've had another question coming in from the audience about that. So I'll address it. And then I have a bit deeper into asset classes, but given that, there are many States employee pension funds in the US that have this large funding gap. Some of them are very heavily underfunded. What do you think can be done the here and what would be your advice or guidance to some of these spaces facing large funding gap issues?
Gert Dijkstra: (31:15)
Yeah, well, I think it's an important question, but at the same time, pretty difficult for me to answer in the sense that I'm curious about the reasons behind the gap. Basically, if you can see what options would, which instruments a pension board has. It's limited. You can say, we can raise the pension premium in, we can lower the pension premium out. We can take more risk in terms of investing, but those are basically the limited instruments the boards of pension funds have. Maybe I can illustrate it by the following. We did some research based on the data our clients gave us that's which gets insight in which part of the premiums paid out were raised by our returns. So if I make it more visible, if you take 100 euro for you, maybe 100 US dollars, but for me, one unit euro, the question was for each 100 euro paid out today to retired fireman or retired teacher, which part is brought up by APGs management.
Gert Dijkstra: (32:54)
So what are the investment returns? And the answer to that question is, well, I'd say very interesting. That's 75 euro. So 75% of the premium paid out are based off investment income. By the way 8 euro is the contribution on average of the employee, 18 euro is the contribution of the employer. And again, 75 is the work we have to do. And I'm not sure whether or not this is the answer but those are the limited options, a pension fund board member has to influence the gap. So that's part of, let's say part one of the answer, part two is there is now a gap. So in a low interest environment, you have to seek for more risky investment opportunities to get an acceptable return for a couple of years or a couple of decades. So what move would forward one way out is to find controlled, but still more risky and more return giving assets, which is a dangerous route.
Gert Dijkstra: (34:22)
But if you don't go that road, it will be extremely difficult to bridge that gap. Obviously, the other one is to cut the bench of premiums paid hours, which is not favorable for society is well, in many senses, it's not a good way to move forward. And obviously the other one is to raise the pension premium page at this moment by their employees. And what we also did is currently with some of the pension funds in the Netherlands, the participants already pay, one day per week of their salary in the pension fund. So we're up 20%. So that's extremely high, extremely high. So in the Netherlands, it's for some of the pension funds, extremely difficult to use that instrument to keep the coverage ratio at a sound level.
Rachel Pether: (35:28)
Yeah. And I think that well, if you suddenly change the amount that you pay out, as you said, it has a whole lot of social implications and relationships either.[inaudible 00:35:37] method as a last resort.
Gert Dijkstra: (35:39)
The good news is, what we have here at Netherlands, I know you know our model. We have the three pillar model where the first pillar obviously is that somebody was working and living in the Netherlands becomes 67 currently, gets a state pension. We don't interfere with that. Then the second pillar is typically our market segment where somebody who is working in the Netherlands on a mandatory basis becomes participant of a pension fund, an industry pension funds. And then when he or she becomes 67, that is paid out as well. And the third pillar obviously, is that you can arrange your individual pension scheme. And that's a market segment where mostly here, the insurance companies are active.
Rachel Pether: (36:33)
And did you know, just quick facts for you that in Birmingham you can retire at age 49 after 15 years. So, as you can imagine, there's quite a difference in the pension model there. We had a whole host of other audience questions coming in. One is, I know you spoke about the public equities and how you look at that, but there's a question that's come in, it's got a few parts to it. Firstly, is how are your policies implemented outside of public equities for example in the private equity and venture capital space. And then the second part, do you invest across the board or you prefer early stage innovation versus much late stage, or do you prefer any sectors or industries as long as they meet those as five pillars that you spoke about previously?
Gert Dijkstra: (37:23)
Yep. Let me first take the last one. Typically pension funds we love long-term predictable cash flows. That's because we have to deal with the liability of our clients. So our clients liabilities. And so the cash flow out is pretty predictable. And so we love long-term predictable cash flows by preferably with a bit of inflation compensation in it. So that's why we invest in [inaudible 00:37:56]. That's why we invest in some of the energy related to industries. Having said that, that was in all the good old days because those markets have become very competitive. So to be positioned, ideally for those long-term cash flows. So for what we call the brownfields, we've moved towards Greenfield, and we have already some mandates from our clients where we can fully invest in venture early stage.
Gert Dijkstra: (38:39)
But still in terms of size it's not that large. So yes, we are moving towards earliest stage in terms of investing, but at the end, we still love our long term predictable let's say brownfield cash flows. So yes, we moved to greenfield. Another important thing is not only in investing, but also in, you might say a behavior or governance. What we did... What we not did, let's say a decade ago was to interfere with project developers, intiaters innovators, and typically in the past years, we moved towards also what you might say, the life cycle value chain in early stage, where we together was entrepreneurs develop, their projects. And if you allow me, two or two examples, one is if you, I would... Rachel, I would advise you when you go and when, come in London again, go visit the Westfield shopping mall.
Gert Dijkstra: (39:47)
That's typically, just parked near the Olympic stadium. It's a beautiful market shopping mall. We already set at the table together with the project developer where there were still the old industry buildings. So that was a very early stage, the same goes for a hotel chain, which started in the Netherlands, by the way, it's called [inaudible 00:40:08]. It's a very easy to go hotel chain. And the same goes there, we started in a very early stage there and that two illustrations of actions we wouldn't have done 15 years ago, 10 years ago, maybe, but we are now trying to position us as a... Well investor for the longterm, but to be... To make that long term interesting, we started early. So that's part one of the answer. The other question was about, yes, you can implement your sustainable, responsible investing policy, in listed equities, but how do you deal with, for instance, private equity or venture capital?
Gert Dijkstra: (41:00)
We have a pretty large private equity portfolio around 20 billion euros. And most of them or maybe all of them are funds, are co-investments secondaries. So we always have to deal with private equity, with GPs, with general partners, and we have to convince them that we really love them, but they need to implement our ideas of sustainable, responsible investing. And that's challenging so the question is absolutely spot on because that's a challenging part, especially in an era where there's so much money available for real assets, for private equity, for venture capital. So at the one hand, you want to be an LLP, in the top core title, GP league and on the other hand you want to negotiate that's the private equity firms start implementing, or at least living up to your sustainable and responsible investing principles.
Gert Dijkstra: (42:08)
The good news is many of the large private equity and top core title, private equity firms have adopted, in the mean time similar responsible investing policies using more or less the same responsible investing criteria. But I think the truth is, it was and still is challenging to get the right level of transparency, the right level of attention for those aspects. So the honest answer is yes, some of the asset classes are easier than the others and private equity is not always easy to get your ambitions in terms of sustainability and responsible investing, implementing, but it's... You need to have a permanent dialogue with those private equity firms and one step forward, I know that in some cases, private equity firms said, no, thank you. We don't want your money because it's too challenging, et cetera. So yes, that's a really a challenge. Good question.
Rachel Pether: (43:27)
Yeah. And I guess with your size, 635 billion having to deploy so much capital, you're already shrinking your investible universe a little bit there as well. It's a lot of money to put to work. We've only got time... we are actually over time, but I'm going to ask one more question from Sebastian Javadi and thank you, Sebastian, because he's a great SALT Talk supporter, but he said, "how do you balance the need to invest in companies that are responsible on the carbon side versus companies that aren't carbon responsible, but are critical to the functioning of our economy." And the example that he gives is, flying appliance for instance, is another carbon friendly activity, but critical for the functioning of our global economy, or maybe not so much in the last few months from the passengers' statement. How do you sort of balance out that tension between, well, necessity or the economy.
Gert Dijkstra: (44:31)
Sebastian great question. And typically a great illustration of one of the dilemmas you encounter, where you have an ambitious, responsible, sustainable investing year that's when policy and tried to implement it. You're typically... Well typically, well, get... I see my colleagues wrestling with those type of dilemmas. And the way out obviously is to start and maintain dialogue with the boards of those companies and try in time to move them towards a situation where they fit into your policy. And maybe, I don't know whether or not we have much time, Rachel but just let me briefly explain our inclusion policy.
Gert Dijkstra: (45:25)
We only invest in companies after a few steps. The first step is to assess whether or not they are a front runner or a [inaudible 00:45:39] in terms of sustainable and development, entrepreneurship. If they are in the front line, then you look at the return options, et cetera. And that it comes into the portfolio. Is there [inaudible 00:45:56]? Those are the most interesting. Applies most on Sebastian question I guess, with your leg art, you have two options, if you see that there is an interesting return perspective, you might say, okay, they are possibly, they are potentially part of the portfolio, but we have to start a dialogue. If the return perspective is negative, these typically are not in your portfolio. So there you see the mechanism we apply, but that is a bit of a technocratic answer on a very, very deep dilemma we encounter every now and then so Sebastian, Thank you very much for the question. It's spot on.
Rachel Pether: (46:35)
No, I think that's a great answer and if it's a case of a [inaudible 00:46:40] and that's an opportunity for you as well, isn't it? As long as the willingness as you say, is there from the actual company to improve. I do just want to ask, I know I said it was the last question, but I do just want to ask, one last question I had about a dozen questions that we didn't get to, and we didn't talk about the elections. I'm happy about that too, but how do you see the post-crisis world and the role of the responsible institutional investor within that?
Gert Dijkstra: (47:15)
Well given that, that's a beautiful last question, which I can, well spend an hour, but you want me to give a brief answer. I still like to have two or three perspective, number one is from a geographical point of view. We guess that, if you look at the three large economic blocks, starting with US. It might be the case that US comes out of the Corona crisis less dominance, partly because there's a division between the States, which is very visible and became even more visible, I guess, during the COVID crisis, Corona crisis. And there is a very strong market and individual orientation. So that might be the big round of US being a less dominance. You have to see that in relation to the second economic block, being China, and although China might come out and be stronger.
Gert Dijkstra: (48:19)
Typically, they cannot take over the leading role globally. The Country is not sufficiently trusted yet at a global stage. And there is evidence sufficiently for that. And then Europe, my own environments. What I see is that Europe is populous divided, and we have to get our act together in decision-making before European union can become a relevant, really relevant part on the global stage. And that is not the case yet. Although I must say that, recently we had a European Green Belt issue, which forced the different countries to work together. And that's a very interesting signal I'd say. So that's perspective number one, if you'll allow me, the second one, that's technology because we do see that the crisis, the COVID crisis might reinforce technological trends in which you can see that US and China have far more stronger technology sectors than Europe.
Gert Dijkstra: (49:34)
Let me illustrate that with the one third of the engineers globally, live in China. So that is a potential source for innovation, which is great. Then you might say that some of the industries like pharmacy and biotech will continue to grow, maybe boost even. Mass entertainment, we think to take a hit over digital individual entertainment. What I will say obviously is that the tourist industry might come out quite differently then when we started the investment company. My last three remarks on the COVID crisis, is one; What we see is that's not necessarily the US dollar will stay the only reserve currency, the midterm or long term, you might even say, it's not inconceivable that interest rates and inflation will take a different path and start to rise sharply. And what other consideration might be that perhaps it will be a turnaround in the popularity of illiquid investments and listed markets being more transparent and being more digital might be re-assessed and being for large institutional investors before will be more relevant and interesting. Well, let's keep it there.
Rachel Pether: (51:16)
Thank you so much Gert for summarizing what could have been an hour answer about three and a half minutes. That was very impressive. And we're slightly over time, but I just wanted to say thank you so much for your really thoughtful and in-depth answers and providing such a great window into APG Asset Management and yourself as well. So thanks very much again.
Gert Dijkstra: (51:37)
Good. Thank you, Rachel. Always great to have a dialogue with you. Thanks.