APG, on behalf of its pension fund clients ABP, bpfBOUW, and PPF APG, has committed as a cornerstone investor in Colesco Capital's direct lending platform. This newly established platform with roots in the Netherlands provides private loans to European mid-market companies that contribute to the transition to a more sustainable society. On behalf of APG’s Alternative Credits team Marcin Lenart (Expert Portfolio Manager), Arber Demaj (Senior Portfolio Manager), and Shahzad Memon (Portfolio Manager Responsible Investments) share insights about this unique partnership.
Published on:
27 January 2025
In a nutshell:
• Investing in Colesco provides attractive risk-adjusted investment returns with a strong focus on impact investments.
• The platform emphasizes investments with an impact in the Netherlands.
• Private debt is appealing because it offers additional financial returns due to illiquidity and complexity.
Why did APG choose to invest in Colesco?
Demaj: “Our clients have become increasingly focused on impact and have set ambitious targets. As well as investing in companies that can make an impact, they are keen on creating impact in the Netherlands. Over the past few years, we’ve intensively engaged with Colesco to see how we could align these goals. Colesco invests in private debt while achieving impact in themes prioritized by our clients, with a focus on the Netherlands, while delivering attractive returns. It is a unique investment opportunity as there aren’t many other opportunities that meet these specific criteria.”
Memon: “Colesco benefits from our investment not just through capital but because our approach to responsible investing aligns closely with theirs. This includes compliance with APG’s regulatory and ESG risk management requirements, as well as their broader philosophy on impact. As a cornerstone investor, we were able to help shape the platform to meet the specific needs of our clients, thereby achieving a high investor contribution.”
How did Colesco respond to APG’s engagement?
Demaj: “Colesco is backed by Rabobank, with whom we have a strong historical relationship. Colesco was seeking a strategic partner that shares the same vision and investment philosophy. They stood out as one of the few managers able to deliver on our requirements with respect to responsible investments and to deliver attractive investment returns for our clients.”
Lenart: “We started initial discussions with Colesco at the same time APG was drafting its impact framework. As a result of our engagement, we were able to share useful feedback with each other on our respective impact classification and reporting. Ultimately, Colesco’s approach to impact and our impact framework are well aligned.”
What are some examples of companies in which Colesco invests?
Memon: “ABP, our largest client, has an emphasis in their impact framework around four key themes: climate, biodiversity, affordable housing in the Netherlands, and overall impact in the Netherlands. However, investments can also address all other themes within ABP’s framework, which is based on the Global Impact Investing Network (GIIN). With this particular platform, Colesco targets climate, sustainable food, healthcare, and education. For example, one company Colesco invested in provides energy efficiency improvements for residential— such as social housing—and semi-public buildings in the Netherlands from a products and services lens, aligning with the climate and energy efficiency themes.”
Why is private debt an ideal asset class for financial and sustainable returns?
Lenart: “Private debt is appealing because it offers additional financial returns due to illiquidity and complexity. Next to that, it has a strong responsible investment angle where direct impact can be made in private companies.”
Demaj: “Transitioning the world to cleaner energy, for instance, requires more than just equity investments. You cannot change the world without debt. While we invest in private equity and other equity-related asset classes, private debt like Colesco’s platform adds another layer to the financial ecosystem.”
What trends are emerging in the impact private credit market?
Memon: “Historically, impact investing did focus more on developing and emerging markets because these regions often presented clear opportunities for measurable social and environmental impact, such as access to clean water, renewable energy, or affordable housing. Thanks to asset owners like ABP, impact investing is now gaining traction in developed markets, driven by growing demand from asset owners and managers. One unique aspect of private debt is its transparency: you often know exactly the use of proceeds, making it easier to measure and attribute impact outcomes.”
How do you ensure return and sustainability objectives are equally met?
Demaj: “For us, it’s crucial that impact objectives don’t compromise returns, which is why we carefully examine the manager’s track record and the expected returns of their deals. We’ve agreed with Colesco that a substantial part of their portfolio must be impact investments as well as investments in the Netherlands. They will report proper impact outcomes which are aligned with IRIS+. Half of the performance-related fees are directly connected to realizing the platform’s sustainability KPIs, creating strong alignment of interest.”