The German government is examining the possibility of applying sustainable principles to fixed income allocations of pension and social security assets, a spokesperson for the Federal Ministry of the Interior has told IPE.
The government invests pension assets sustainably taking into account the requirements of the Paris Agreement, he said.
Therefore, the German government is also assessing the option of investing the assets of the country’s four pension and social security funds in fixed income “even more sustainably”, he added.
In a reply to a parliamentary inquiry of the Greens, the government mentioned the assets of four funds including the Federal Employment Agency, the Versorgungsrücklage des Bundes (used to relieve public finances from future federal pension expenses), the Versorgungsfonds des Bundes (a special fund created to finance part of pension expenses for civil servants, judges and professional soldiers), and a fund to stabilise contributions in the long term, worth in total around €43.5bn as of August 2021.
Defining specific sustainability criteria to allocate assets in fixed income is a “complex” matter requiring “intensive examination, which is still on-going,” the spokesperson added.
Germany is in the midst of transferring the pension and social security assets of the four funds invested in equities to the sustainable Euronext V.E ESG-World-select75 and the S&P Eurozone Bund/SV Climate Transition ESG Select Index.
The government will allocate 65% of total equity investments worth approximately €10.8bn to the S&P index, and 35% to the Euronext index.
Pension and social security assets are invested in equities sustainably and in line with the principles relating to security, liquidity and returns as per the Pension Reserve Act – Versorgungsrücklagegesetz.
The government’s sustainability strategy is also taken into account. In its response to the inquiry of the Green party the government said it is planning to define sustainability criteria for fixed income through public capital investments in general in order to help contain global warming.
Asked if the Pension Reserve Act or the Climate Protection Act will change as the result of the introduction of the Sustainable Finance Strategy, the government said that changes are subject to an analysis of the existing rules and the new government will take the decision.
The German government will improve reporting on investments and sustainability by defining a concept geared towards disclosure rules set at EU level and the EU Taxonomy, according to the sustainable strategy.
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