The German government plans to complete the transfer of part of pension and social security assets invested in equities to the sustainable Euronext V.E ESG-World-select75 Bund/SV Index by the end of 2022, it said in a reply to a parliamentary inquiry by the Green party.
The transfer of assets started at the beginning of August.
The government has also started to move pension and social security assets invested in the EuroStoxx 50 index to the S&P Eurozone Bund/SV Climate Transition ESG Select Index at the beginning of August and expects to complete the transfer by the end of 2021, it said.
The government will allocate 65% of total equity investments worth approximately €10.8bn to the S&P index, and 35% to the Euronext index, it added.
In its response, the government referred to assets in the Federal Employment Agency fund – 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.
The Euronext V.E ESG-World-Select 75 Bund Index rose by 3.70%, while the S&P Eurozone Bund/SV Climate Transition ESG Select Index by 2.24% since the start of the transfer.
The German government had selected the Euronext index as a benchmark for investments of its public pension and social security funds in July. It has set a target share of equity investments in the euro and non-euro area, 65% and 35%, respectively, and established a data exchange process between the index providers and Deutsche Bundesbank for the investments.
The pension and social security investments are conducted with an eye on ESG criteria combined with a best-in-class approach and exclusion. The portfolios no longer include shares in companies that operate nuclear power plants.
The investment strategy pursues a goal of a gradual reduction of the carbon footprint of companies in order to support a transition to a carbon-neutral economy.
The government has decided not to immediately exit investments in fossil fuels, it said in the reply, but rather to seek to constantly reduce greenhouse gas emissions.
Its overall strategy takes into account the transition to environmentally-friendly business models, the energy supply required in Germany and the switch to renewable energy, and the fact that exclusion may lead to a restrictive pool of investments.