Government-sponsored pension funds are not mandating an “immediate exit” from the fossil fuel industry, the German government has said in a reply to a parliamentary inquiry from The Left (Die Linke) party. Total assets of the pension funds in question amount to €53bn.

Instead, the government will steer investments to reduce greenhouse gases emissions and CO2 intensity in line with national and international agreements on climate, to transition to a net-zero economy.

Excluding entire sectors would mean limiting the investment universe of the pension funds, and diversification, making it a “questionable choice because of potential liquidity risks”, it added.

An exit from polluting industries would also “deprive companies of financial and political support” on the path to transform their business models, according to the government’s reply. 

As an export nation driven by an energy-intensive economy, Germany will continue to rely on fossil fuels for its energy supply for the time being, the government added in the statement.

The pension and social security schemes’ climate strategy takes into account companies’ CO2 emissions and revenues, according to the European Climate Transition Benchmark (CTB).

Realigning the public pension funds’ equity investments, amounting to a total of €15.9bn, in line with sustainable criteria, is a “complex” process that has been ongoing for several years, the government said.

The pension and social security funds allocate 65% of total equities in their portfolio through the S&P Eurozone Bund/SV Climate Transition ESG Select Index (Euro-Raum) and 35% through Euronext V.E ESG-World-select75 Bund/SV Index (Ex-Euro-Raum), it added. 

The government started to transfer pension and social security assets to the indexes in 2021.

The aim is to achieve “fossil-free equity investments” in the long-term, and climate neutrality by 2045, it added.

The pension and social security schemes invest €37bn in bonds, holding €81m cash, the government said.

In its response, the government referrs to assets of the Federal Employment Agency fund (Versorgungs­fonds der Bundesagentur für Arbeit); Versorgungsrücklage des Bundes, a fund used to relieve public finances from future federal pension expenses; 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. 

Assets are invested according to a best-in-class approach, ESG and exclusion criteria.

Read the digital edition of IPE’s latest magazine

 

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

More from Luigi Serenelli

Topics