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VBV Vorsorgekasse AG

PRI reporting framework 2020

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe In 2019 we got engaged with third party service providers and an Austrian University on ESG solutions for the future and climate-aligned risks and opportunities. We think that E (environment) will have an increasing role in determining which sectors are profitablle to invest in in the future.
Describe VBV has conducted a scenario analysis of climate-related risks and opportunities in 2019, resulting in a sectoral heatmap. Moreover there is an internal project team which evaluates climate risk models in order to integrate this information in the strategic asset allocation process in the nearby future.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

So far we categorize our strategic asset allocation in traditional asset classes. ESG issues are taken into account when it comes to the selections of managers and before investments are made.

In practice, we can control/avoid our exposure to some climate-damaging sectors through:

-our SRI investment guidelines

-we are very careful when it comes to invest in small caps and in Emerging Market Debt and Emerging Market Equities, where we have a lower exposure than most of international asset owners.

 


SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

In 2019 we got engaged with a leading  Austrian University and third party service providers on  climate-related risks and opportunities. We conducted a heat map scenario analysis of climate-related risks and opportunities for our invested securities with assistance from pwc Germany. The scenario analysis tested the resilience of our equity portfolio against a climate-related scenario of 2° Celsius or lower. The 2° Celsius scenario has been based on International Energy Agency with the time horizons 2025 and 2030. The result of the analysis for the time horizon 2025 showed that overall, under a 2° C pathway, the portfolio would be mostly resilient regarding transition risks. Until 2030, the portfolio might become less resilient and the geographic differences more profound. A deep dive into sectors showed that some sectors and sub sectors are more exposed to transition risks.

We acknowledged that most of the climate risk in a typical equity portfolio is very concentrated into fossile fuels.

Since 2016 we have no investment in coal in our portfolio and we are monitoring our holdings in oil & gas to keep them low and reducing them when we see the opportunity to do so.

13.5 CC. Indicate who uses this analysis.

specify

          SRI investment guidelines: valid for all our AUM.
Some of our external managers are divesting from upstream fossile fuels 
Findings from service providers: internal
        

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Describe

As severance-pay fund, we have a very long time horizon and we have been evaluating the potential impact of climate-related risks since our foundation and beyond our investment time horizon.

Therefore it is our aim to integrate climate-risk models in the strategic asset allocation and ALM process.

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          PACTA
        
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

Our investment criteria provide a sufficient framework to favour low carbon investments.

 

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

Our reports are written by external parties and analyse our equity portfolio in terms of the carbon emissions and other carbon related characteristics of the underlying portfolio companies. They compare this data to the performance of a relevant respectively chosen market benchmark.  Metrics provide absolute and relative figures for portfolio carbon emissions and intensity measures: the total carbon emission answers the main question “What is my portfolio’s total carbon footprint?” as it measures the carbon footprint of a portfolio taking scope 1-2 emissions into account. The relative carbon footprint is a normalized measure of a portfolio’s contribution and is defined as the total carbon emissions of the portfolio per million EUR invested. It enables comparisons with a benchmark, between multiple portfolios, over time and regardless of portfolio size. Carbon intensity is expressed as the total carbon emissions per million EUR of revenue. It therefore measures the carbon efficiency of a portfolio per unit of output.

Together with PWC Germany we did a scenario anlysis:

• Two portfolios were analysed for transition risks in a 2°C global warming world (IEA), with
~1600 corporate titles (MSCI Portfolio) and ~400 titles VBV test portfolio. ~50% for MSCI and
~60% for VBV test of the overall titles in sectors that potentially are more exposed to climate related
risks and opportunities
• Risk position: Both portfolios would experience growth in a 2°C , the weighted MSCI
portfolio slightly higher (~1% p.a.)
• Portfolio management: However, an unweighted view shows material potential for
active portfolio management, leveraging the potential in transportation and agriculture, and
managing risks in the energy as well as materials and buildings sectors
• Company management: For active portfolio management, it is paramount to look into
sub-sectors and regional split
• Process integration and reporting: As the financial impacts result from fundamental
market, price, technology and competitive changes, the analysis can easily be integrated
into the existing company analysis and risk management, and provides the basis for the
TCFD integration roadmap and reporting as well as for strategy guidance

 

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          contribute to climate goals
        
          no investment in coal since 2016
        
          no investment in coal since 2016
        
Weighted average carbon intensity
          contribute to climate goals
        
          Equity: 104,5 tCO2e/EUR mn invested
        
          Equity: 104,5 tCO2e
/EUR mn invested
        
Carbon footprint (scope 1 and 2)
          know how much our investments emit per EUR invested
        
          Equity: 79,2 tCO2e/EUR mn invested
        
          pro-rata share of equity based on ownership
        
Portfolio carbon footprint
          know how much our investments emit per EUR invested
        
          Equity: 79,2 tCO2e/EUR mn invested
        
          pro-rata share of equity based on ownership
        
Total carbon emissions
          know how much we emit through our investments
        
          Equity: 48.604,6 tCO2e (scope 1&2)
        
          pro-rata share of equity based on ownership
        
Carbon intensity
          measure how much are carbon emissions per EUR
of revenue are generated
        
          Equity: 114,2 tCO2e/EUR MIo Revenue
        
          pro-rata share of equity based on ownership
        
Exposure to carbon-related assets
          no investment in coal
        
          no investment in coal
        
          no investment in coal
        

14.7 CC. Describe in further detail the key targets.

Target type
Baseline year
Target year
Description
Attachments
          2019
        
          2019
        
          Carbon footprint 30% below MSCI World
        
          2020
        
          2020
        
          Carbon footprint 30% below MSCI World
        

          
        
          
        
          
        

          
        
          
        
          
        

          
        
          
        
          
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

We make use of the definitions of climate risks given by Carbon Tracker and IEA. Climate risk is part of our risk classification framework, as it has been ranked by our shareholders as one of the most important concern for our business. We took actions by actively investing into climate-friendly investment opportunities and by eliminating companies deriving more than 5% of their revenues from coal from our investment universe. We do consider existing and regulatory requirements related to climate change.

As VBV is working on fully integrating climate-related risks into risk management going forward, an internal project, with members from the risk management and the asset management department, has already been started in 2019.

 

 

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

PWC Germany produced a heatmap analysis for us, where an output was a development towards TCFD adoption:

Process integration and reporting: As the financial impacts result from fundamental
market, price, technology and competitive changes, the analysis can easily be integrated
into the existing company analysis and risk management, and provides the basis for the
TCFD integration roadmap and reporting as well as for strategy guidance.


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

15.5 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

1.5 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

We are invested in a mutual fund that specifically addresses renewables energy stocks and we directly also manage a basket of renewable energy titles.

Asset class invested

5.8 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Sustainable real estate funds, both manadates and mutual funds.

Asset class invested

1.4 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Loans to a municipal company providing social housing.

          Impact Investing, social bonds, green bonds, senior housing
        

Asset class invested

3.0 Percentage of AUM (+/-5%) per asset class invested in the area
1.0 Percentage of AUM (+/-5%) per asset class invested in the area
1.0 Percentage of AUM (+/-5%) per asset class invested in the area
0.6 Percentage of AUM (+/-5%) per asset class invested in the area
1.2 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

-dedicated global impact bond fund.

-green bonds and social bonds

-senior housing

-social infrastructure

 

15.4. Please attach any supporting information you wish to include. [OPTIONAL]


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