Versorgungsanstalt des Bundes und der Länder (VBL), Germany’s supplementary pension provider for public sector employees, is reviewing its internal guidelines for asset allocation, according to a reply by the government to a parliamentary inquiry led by the Green party.
VBL is also re-assessing and further developing its approach to sustainability in its asset allocation, the government added.
The pension provider will integrate risks relating to sustainability in its asset management and in its risk management process when identifying and analysing investment risks, their causes and interactions.
Sustainability risks are among the factors contributing to other types of risks, such as credit risk and market risk, VBV added.
Moreover, as part of its asset liability management, VBV will conduct at least once a year an analysis of the progress of its investments, obligations and risk-bearing capacity in order to design risk control measures, for example in the form of strategic asset allocations in line with long-term obligations.
The analysis will also lay the ground to develop tactical allocations, VBV said, adding as an example the option to reduce investments as the market risk of an asset class increases, if regulatory measures such as the rise of the CO2 tax, or if companies do not operate sustainably or do not use the funds to transition to sustainable business models.
VBL excludes equity and bond investments linked to serious and systematic violations of human rights or the core standards of the International Labour Organization (ILO).
Equity and bond allocations linked to manufacturing or trade of cluster munitions and anti-personnel mines, and biological and chemical weapons are excluded in line with the United Nations’ ban on weapons.
The VBL is also considering excluding companies active in the energy and raw materials sectors with a predominantly coal-based business model, as well as countries whose MSCI ESG rating indicate serious human rights violations, it said.
According to the reply from government, VBL currently invests a total of €368m in companies that are on the Global Coal Exit List, a database listing firms part of the thermal coal value chain.
VBL engaged with investee companies by exercising voting rights at AGMs, or conducting discussions with supervisory boards, companies’ board members and investor relations or corporate sustainability representatives on critical issues relating to sustainability.
VBL’s assets under management stood at €25.7bn in 2019 with 4.08 million members, according to the latest publicly available financial statement.