The Versorgungsanstalt des Bundes und der Länder (VBL), Germany’s supplementary pension provider for public sector employees, has chosen Amundi Deutschland to invest over €1bn in green, social and sustainable bonds.
Amundi will invest the assets in government bonds and bonds issued by local authorities, supranational organisations and bonds with public guarantees, with an investment grade rating and denominated in euros.
The investment will aim to finance projects with positive environmental and climate impact, including social projects.
Such impact investments include cutting greenhouse gas emissions, job creation, and generating electricity from renewable energy sources, it said. As for social projects, these will include financing affordable basic infrastructure, promoting access to essential services and affordable housing, job creation and food security, Amundi said in a statement.
Amundi cited as an example a government-related organisation in Spain issuing a €500m social bond to create more than 14,000 jobs in small and medium-sized companies through bridging loans to ultimately mitigate the impact of the COVID-19 crisis.
The bonds are subject to strict criteria by the International Capital Market Association (ICMA) and the bond issuers are required to report every year on the use of the proceeds.
Tobias Löschmann, head of Institutional sales at Amundi Deutschland, said the market for green, social and sustainable bonds had experienced a strong upswing in recent years and wa “increasingly evolving into one of the key segments for institutional investors”.
Michael Leinwand, member of the management board responsible for asset management at VBL, added: “We are very pleased to have reached another milestone in the implementation of our new sustainability strategy with the mandate, and to invest in projects that specifically pursue ecological, social and sustainable goals.”
VBL often uses the expertise of external fund managers to implement its strategic and tactical asset allocation, it said.
Investments in equities and corporate bonds are especially impacted by sustainability risks and are conducted exclusively indirectly via investment funds.
VBL requires asset management companies to put in place their own internal strategies to invest only in equities and bonds of issuers that are not on the pension fund’s exclusion list.
VBL excludes issuers of equities and bonds linked to serious and systematic violations of human rights, manufacturers or traders of cluster munitions, anti-personnel mines, biological and chemical weapons.
It also excludes companies with a predominantly coal-based business model, it said, adding that it will cut existing investments in coal by the end of 2025.