APG’s award-winning approach to real estate investing

At last month’s Investment and Pensions Europe (IPE) conference, APG’s real estate team took home three awards. We spoke with Derk Welling, Senior Portfolio Manager RI Real Estate, about APG’s award-winning approach.

APG received a Platinum Award for Sustainable Investing, another Platinum for Innovation (see box below the article), and a Silver Award for Best Investor from the Netherlands. “APG is undoubtedly a leader in sustainable investing and, most importantly, has influenced the real estate industry to improve its sustainability credentials,” the jurors noted.

One of the key takeaways, according to the jury, is APG’s proactive and genuine ESG focus and standards. A prime example is APG’s role in promoting global industry standards like CRREM. But where else does this proactive approach show?
“For asset types and countries where CRREM pathways are not yet available, we accept Science-Based Targets initiative (SBTi) goals. We also require a business plan that demonstrates the financial feasibility of these targets—though that’s still a challenge to assess. In addition, we promote Green Building Certificates and full disclosure on Scope 1, 2 and material Scope 3 emissions. Furthermore, we have various recurring initiatives, such as our annual Climate Engagement Letter, which we send to real estate companies in Europe, North America, and APAC this year. This letter included company-specific data and outlines our expectations related to climate. Finally, we request geo-coordinates, which we use to conduct our own analyses of physical and biodiversity risks. These data points are essential for our real estate underwriting.”

How do companies respond to these demands?
“Real estate companies are being pushed to develop decarbonization plans under the CRREM pathways, which often require significant investments. That naturally leads to some resistance, with arguments that the targets are economically or technically unfeasible.

We recently sent our Climate Engagement Letter to 45 European real estate firms. Over 25 have responded, and we’re now in dialogue with them. Sometimes they dispute the data and ask us to correct it. Other times, they seek clarification or challenge our requirements. We explain that we intend to use this data in our voting policy on behalf of our pension fund clients. So it’s crucial that the data is accurate and publicly disclosed.

There’s also occasional debate around the cost and value of Green Building Certificates. Our response is that, beyond the costs, these certificates offer multiple benefits. They can be used for Sustainability-Linked Loans and Green Bonds, and they provide a consistent way to assess ESG performance across an entire real estate portfolio. Over time, they also help demonstrate compliance with the EU Taxonomy’s technical screening criteria.”

How do sustainability requirements relate to investment returns in real estate?
“It’s a balancing act—one that helps preserve long-term value. Starting in 2027, Europe will introduce a carbon trading scheme for buildings, which will increase operating costs for high-emission properties. That will impact the value of less sustainable assets. So our focus on sustainability is part of a broader value protection strategy.”

The jury also noted that APG is ‘well placed to outperform peers in the coming years.’ What does this mean for the Dutch real estate market?
“In the Netherlands, we’re ahead of the curve in terms of sustainability requirements. We want to invest in new developments that meet BREEAM Excellent standards. Much of the current supply doesn’t yet meet that Excellent bar. But with our largest pension fund client ABP committing €5 billion to the market, developers are realizing they must meet these standards if they want to sell.

For new developments, we also apply CRREM requirements that go beyond current Dutch norms. We require that new buildings remain below CRREM thresholds for energy and carbon intensity for at least 15 years post-completion. That’s not something most Dutch developers are used to.

Alongside peers like PGGM and Norges, we’re setting the tone. The fact that CRREM pathways have quickly become the norm shows the influence we collectively have. We as APG recently spoke with several listed real estate firms we invest in—they’re now working to phase out gas in their buildings. The transition is clearly underway, though not without its challenges, as companies still face technical, financial, and regulatory hurdles along the way.”