Germany’s VBL sets tailored net zero goals across asset classes

Versorgungsanstalt des Bundes und der Länder (VBL), the German public sector supplementary pension fund, has revised its net zero investment policy by introducing separate interim targets for its equity, corporate bond and real estate portfolios.

The €70bn fund told IPE that the differentiated targets reflect the different metrics used to calculate CO₂ intensity across asset classes.

“For real estate, the CO₂ intensity is calculated per square metre of total area. By contrast, the CO₂ intensity for equities and corporate bonds is calculated per euro of revenue,” VBL said.

VBL aims to cut greenhouse gas emissions from its equity and corporate bond holdings by 50% by 2030 compared with 2021, investing via ESG standards and mandates, and critically assessing individual holdings.

Nordea Asset Management manages €1.25bn of European equities for VBL in line with MSCI’s Climate Paris-aligned benchmark.

For real estate, the pension fund targets a 40% reduction in emissions by 2035, compared with 2025, focusing on energy-efficient renovations and investments aligned with the Carbon Risk Real Estate Monitor (CRREM).

The interim targets are designed to support the fund’s net-zero goal by 2050. CO₂ intensity in equity and corporate bond portfolios fell 31% by the end of last year compared with 2021, exceeding the 25% interim target.

“We do not want to rest on our laurels,” said chief investment officer Michael Leinwand.

The fund aims to further increase its contribution to limiting global temperature rises.

The pension fund’s 2050 net-zero goal “addresses rising expectations, from society and regulators,” it statded adding: “Moreover, it leads to an improvement in the environmental and social impact of VBL’s investments.”

Equity, corporate bond and real estate allocations are complemented by targeted impact investments in infrastructure and green, social and sustainable bonds to reduce greenhouse gas emissions in the real economy. VBL had around €4.8bn invested in these areas by the end of last year.

Infrastructure investments focus on projects increasing energy efficiency and promoting renewable energy, while sustainable bonds fund initiatives to reduce social inequality, provide social housing, and improve access to basic infrastructure.

Amundi Deutschland has been selected to invest over €1bn in green, social and sustainable bonds on behalf of VBL.