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VBV Vorsorgekasse AG

PRI reporting framework 2020

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Innovation

SG 18. Innovative features of approach to RI

18.1. Indicate whether any specific features of your approach to responsible investment are particularly innovative.

18.2. Describe any specific features of your approach to responsible investment that you believe are particularly innovative.

In 2015 COP 21 set the goal of limiting global warming to less than 2°C compared to the pre-industrials level[1]. The Intergovernmental Panel on Climate Change (IPCC) states that global warming of the last two centuries is man-made with a probability of 90%[2]. Moreover, it estimates that average temperatures will rise between 1.2°C to 6.4°C compared to pre-industrials level by 2100, depending on the extent to which we will work to stop the process.

Helping to achieve COP 21´s target seems to be driven by economic efficiency. Financial economy manages more resources than real economy. More than anybody else the financial industry and especially pension funds have to deal with these issues and invest today´s savings into value adding, reliable and forward-looking companies for a low carbon environment. In early 2015 VBV-Vorsorgekasse started collecting academic, scientific and NGOs papers to get deep into the climate change issue. We believe that taking the opportunity and invest in the de-carbonisation of our economy is not only our duty towards society but also a major chance for long-term investors.

We first did some research on the stranded assets question for coal, oil and gas[3]. We acknowledged that coal represents half of the total carbon risk, oil 1/5, whereas gas plays a smaller role. We observed that a 2°C pathway does not see demand for coal exceeding the amount that could be produced from mines that are already producing it: this suggests that coal may acquire the feature of “stranded asset”. The same is, by now, not true for oil: from one side oil demand peaks around 2020 in the COP 21 scenario. On the other hand oil wells see the rate of production decline over time, which means that even to maintain a level of production, further investment is required to bring new wells on-stream. As a result the majority of existing production and further new projects are still needed. Gas demand is expected to grow, but at a lower level than expected under a business as usual scenario. We also discussed the topic with our ethic committee. After all this analytical framework and discussions we got convinced that carbon topic is and will be important for our company, so it was time to take action. First of all we joined the WWF Climate Group in order to cooperate with same minded companies. Then we signed the Montreal Carbon Pledge as first German-speaking institution. This initiative was launched on September 25th, 2014 at the Principles for Responsible Investment (PRI) Summit in Montreal, and is supported by the PRI and the United Nations Environment Programme Finance Initiative (UNEP-FI). By signing the pledge we committed to measure and, most importantly, to publish the carbon footprint of our investment portfolio on an annual basis. The WWF Climate Group and the Montreal Pledge were platforms which we used for setting up an international network for information and know-how exchange.

The divestment process continued with the formal exclusion of coal since the beginning of 2016. In a first step VBV - Vorsorgekasse is not investing anymore in companies with more than 5% of their revenues deriving from coal mining.

The next step consisted in measuring the carbon footprint of our portfolio. In 2019 we asked an independent consultant to measure carbon emissions of all our bonds and stocks for the fifthth year. We do it because we are sensitive about the carbon footprint of our holdings and because we want to compare the results within the industry. Last but not least we want to gain more information about the carbon intensity of our portfolio in the course of time, so we can identify which assets are most exposed to natural capital risk, and which companies and governments are able and willing to adapt. Our stock portfolio´s scope1 and scope2 carbon emissions, measured in tCO2e, are 79,2 tCO2e/ EUR Mio invested, 38,7% lower than the benchmark, identified in BM MSCI World. We were provided financed emissions, carbon intensity (tCO2e/ EUR Mio Revenue) and average sector emissions for each single asset we invested in.

We now plan to analyse and evaluate other industries that are particularly CO2 intensive and establish a policy on how to treat companies from these industries.

VBV is not only keen on carbon footprint of the portfolio but also for the company itself. Since 2015 measures were taken to make VBV – Vorsorgekasse a climate neutral company itself by compensating the carbon emissions through certificates.

There is still a long way to go for a decarbonized world but we are on the way to make our contribution to reach this goal.

 

[1] http://www.cop21paris.org

[2] http://www.ipcc.ch/

[3] http://www.carbontracker.org/report/stranded-assets-danger-zone/

 

 


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