Thijs Aaten is the CEO of APG Asset Management Asia and is based in Hong Kong. He describes how a Dutch pension fund investor benefits from a local presence in Asia, and how this enables APG to have impact as a responsible investor.
What is the added value for APG of having an office in Hong Kong?
"Of course Hong Kong has long been the finance and trade hub in Asia. It has a strong financial regulatory framework in place, at par with global standards. So when APG first set up shop in Asia in 2006 it was the obvious choice. It really is located in the heart of the region: half the world's population lives within five hours flying distance from Hong Kong. It also serves as an important gateway to China. And very importantly for us, the Hong Kong labor market is in my opinion still the best in Asia for the kind of talent and skills that we seek in our profession. Our office here employs close to a hundred people, and the team is made up of as much as twenty different nationalities. This shows that people from across Asia and in fact the world are attracted by Hong Kong as a place to live and work. In 2015, the business embarked on a growth strategy in Asia. Since then, we have added new asset classes, including high-conviction strategies in global emerging markets, small and midcap equities, China A-shares and fixed income, private equity, and natural resources. We have also expanded our existing real estate, infrastructure, and responsible investment and governance teams. We have branched out too and established offices in Beijing and Shanghai, and are in the final stages of opening an office in Singapore."
What is the reason for this growth?
"Well of course we can’t ignore the obvious market potential and underlying macrotrends present in the region as a source for future growth. Another reason is the nature of the investments we focus on. From the Hong Kong office we specialise in investments that are better suited to pursue on-the-ground. We focus mainly on private investments, for example in real estate, infrastructure and renewable energy projects. These are the kind of investments where closeness to the business is very valuable. It helps to have domestic expertise with more direct access to local networks. It helps to in-depth local knowledge and to be able to build personal relationships and trust, or being able to meet with your counterpart and discuss a difficult point in a negotiation without first having to take a 12-hour flight.
Talking about local aspects of investing, how does that relate to ESG?
"We have been active in responsible investment and stewardship in Asia Pacific since 2009, with a dedicated responsible investment team in Hong Kong providing technical expertise and support to the portfolio management teams, and leading engagements with portfolio companies. I would say ESG generally plays the same role here as it does in Europe. There is a lot of attention for responsible investment practices and these have become increasingly important. Regulators have responded with additional and more stringent requirements and monitoring, just like they have in Europe. That said, I do believe that local asset owners' ambitions with respect to ESG generally are not quite as ambitious as those of a Dutch pension fund manager that aims to be a leader in this area. APG is at the forefront of responsible investing here in terms of the attention and efforts we dedicate to ESG."
What are examples of such efforts and what successes have you achieved?
"Without Asia-Pacific, we won’t achieve climate neutrality by 2050. This is a key focus area for us. Our recent engagement on climate change with a number of large corporations in Japan and Korea demonstrates this. Recently Samsung made a net-zero commitment, and that is partly due to our continued engagement with them on this topic. In front of me on my desk is another example - a recent report on gender diversity in India to which APG has contributed: 'Corporate India: Women on boards'. We believe that women representation on boards in India, and globally, should increase faster than in recent years, because a balanced and diverse board contributes to effective decision-making, which ultimately leads to business resilience and value creation over the long term."
How is it being perceived when a Dutch asset manager that wants to be a leader in responsible investing holds companies in Asia to its own standards?
"First, it would be a mistake to view such standards as 'ours', because they are mostly global standards that are needed to help address global issues. Maybe in some cases we are seen as very demanding with respect to responsible investing and maybe in some cases we could sideline ourselves with such an approach. But if these are the principles we hold, and if we believe that this contributes to good investments and at the same benefits society at large, then why not? I think this latter combination is especially relevant in Asia. The potential for economic growth in the region is higher than in Europe or the US. There is a large demand for the type of private investments we do, and that enables us to generate the returns that our pension funds seek. In these projects we're also in a position to ensure that they are done in a responsible manner, perhaps more so than without us on board as an investor. And given how many people live in this region, and that the average standard of living here is lower than in Europe or the US, it means that here we can achieve more with respect to the Sustainable Development Goals."
Do you see further growth and new investment opportunities for APG in Asia?
"Where I see new opportunities is in asset classes like hard currency emerging market debt and private equity. Now we primarily invest in local private equity funds, but I think there are good opportunities for us in co-investments and in secondaries. From a geographic point of view, we also expect economic growth to be strong in countries like Indonesia, Malaysia and India. But our focus in the next few years will mostly be on delivering clear results with our current strategies, financially and in terms of responsible investing."