APG Asset Management, the wholly-owned asset manager of the giant 173bn ($231bn) ABP pension fund for Dutch civil servants, is investing $50m (37.5m) in an energy efficiency project in China in one of the most innovative sustainability moves by a pension investor to date. The investment, which is being run from APGs Hong Kong office, will see the fund manager supply capital to Chinese companies for investment in energy efficient technologies and then share a portion of the revenues generated by the cost savings from their implementation.
The allocation is being made under APGs innovation initiative in which the fund has allocated up to 2% of total assets for new investment ideas that can be brought forward by staff and then developed through robust business planning and testing. The innovation bucket has already given rise to investments in music rights, a move that led it to recently acquire the back catalogue and rights to the songs and musicals written by Rodgers & Hammerstein such as The Sound of Music. Rob Lake, head of sustainability at APG, said: We are investing in a fund that effectively brings together suppliers of energy efficiency equipment and energy service companies who
then implement the new technology that enables energy end-users to lower their energy bills. The financial structure makes it attractive for large-scale investors like us, which has never been the case for energy efficiency before. The energy user (the Chinese company) doesnt have to put any capital up front, they get the capital from the fund weve structured, which is then invested in the new lower energy technology and the cost savings are shared between the energy user and the fund, which makes the return to us.
The fund structure was put together by Michael Friedlander, COO/CFO at APG Investments Asia, who has a background in the power industry and in hedge funds. APGs Hong Kong office employs 26 people and manages around 4.5bn. Separately, APG has also recently committed $100m as part of its hedge fund allocation pot to US firm FEs Global IIII Clean Energy fund, which makes investments in hydro-electric power in Asia, biomass and methane capture in Latin America and Eastern Europe and ethanol production in Thailand.
The investment is expected to be one of a number of new allocations to sustainability driven themes that APG will unveil in the coming months.