Versorgungsanstalt des Bundes und der Länder (VBL), Germany’s supplementary pension provider for public sector employees, is progressing with its responsible investment strategy, planning to cut CO2 intensity in its investment portfolio, and the exposure to coal companies.

The pension fund aims to reduce the CO2 intensity in its equity and corporate bond portfolios by 25% by the end of 2025, compared with the level recorded at the end of 2021, it said in a note.

The scheme combines exclusion criteria, the integration of ESG standards in its investment strategy, engagement and impact investments to achieve the goal, it added.

In a first step, VBL will exclude from the pool of invested companies generating more than 25% of their revenues from coal. It has started to reduce existing investments in companies whose business model is based on coal at the end of last year.

Currently, the carbon intensity of VBL’s equity and corporate bond portfolios is in line with market indices such as the Morgan Stanley Capital International World Index - MSCI-World, the pension fund said.

VBL is reviewing its policy on sustainable and responsible investments in light of expectations raised by its members, and the wider society, and regulatory changes. Additionally, to have an impact in terms of investments, the fund is looking at opportunities to allocate assets during the transition to a greener economy.

Chief investment officer Michael Leinwand said: “As a responsible pension institution, VBL considers the reduction of CO2 emissions to be part of its fiduciary duty. Climate change, with its negative effects on nature, society and the economy, is considered one of the greatest global risks of our time.”

The pension fund’s responsible investment strategy is based on four pillars: engagement, exclusions, impact and ESG integration. To achieve impact through investment, VBL focuses on asset classes where it can exercise direct influence, for example through a green and social bond mandate, in which it has €1.6bn invested.

It will also review its real estate portfolio to improve energy efficiency, among other things, considering infrastructure equity, a well-suited asset class for impact investments, the CIO said in an interview with IPE.

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Luigi is IPE's Berlin-based DACH correspondent. His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market. He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile

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