Germany’s nuclear waste management fund KENFO, the designated asset manager of the first pillar equity fund Generational Capital (Generationenkapital), has spoken out against introducing new requirements by law to invest the assets of a reformed pay-as-you-go system.
According to KENFO, “there should be no legal requirements for sustainability” when investing assets in the first pillar equity fund.
Strict legal requirements would create an obstacle to constantly adapt sustainable investment to “new findings and developments”, it added in a statement published by the Parliament’s (Bundestag) committee for Labour and Social Affairs.
KENFO recommends, instead, it should stick to its sustainability approach, which also takes into account the goals of the Paris Agreement and integrates ESG criteria.
Experts at the fund should decide on the means to achieve ESG goals so that the measures taken have the greatest possible benefit when it comes to reducing CO2 emissions, and are as profitable as possible, it added.
Investments in equities of oil and gas companies would not be excluded from the portfolio when investing Generational Capital’s assets, according to KENFO.
Oil and gas are essential cornerstones of energy security as part of the government’s energy transition strategy. Such investments are important for KENFO in order to achieve good returns even in times of geopolitical tension or high inflation.
The bill drafted to reform the first pillar pension system, which set up the equity fund and stabilises the level of pensions, is in line with Germany’s sustainability strategy, the government said.
The guidelines to allocate Generational Capital’s assets will include ESG criteria, and the social aspect of the sustainability strategy is positively influenced by the introduction of a capital-funded mechanism in the first pillar, according to the government.
The government is facing criticism for vaguely formulating how money is to be invested according to ESG criteria.
According to Sozialverband VdK, an advocacy group fighting for social justice, the possible negative social and ecological side effects of the investment policy and investment strategy “are not named or specifically addressed in the draft law”.
The investment guidelines will be developed at a later stage without a direct commitment to social and ecological sustainability criteria, the group added in a statement sent to the parliamentary committee.
A group of NGOs has called on the members of parliament to add climate, environmental and human rights aspects to the law to manage first pillar assets, based on the UN’s Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.
The Sustainable Finance Beirat (SFB) advising the government on the country’s sustainable finance strategy said that the Generational Capital fund leads to questions on how to take into account sustainability criteria and principles in its investment strategy, and regular reporting.
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