For us, sustainable investing means factoring important environmental, social and governance risks into our investment decisions.Nicole Becker
The group’s sustainability approach focuses on initiating change through an engagement strategy and, for example, by exercising its voting rights as an active investor. “We believe that in order to achieve the maximum effect, you need to get actively involved i.e. to enter into a constructive dialogue with companies,” says Nicole Becker, Head of Board Affairs and Sustainability in the Investments Division of Bayerische Versorgungskammer (BVK). “For us, sustainable investing means factoring important environmental, social and governance risks into our investment decisions in order to boost performance, promote exemplary standards and create long-term value.” In Becker’s opinion, this is the best possible approach among several possibilities. The BVK tailors this approach for each asset class, in line with its ESG guidelines.
Germany´s largest pension group under public law made a conscious decision to not use filters exclusively or to adopt a pure “best-in-class” approach. An investment strategy can only be truly diversified – which is important from a risk point of view - if it incorporates ESG principles. Sustainability is the fourth dimension of BVK’s investments alongside liquidity, security and return.
Sustainability is an integral part of BVK. Occupational pension and incapacity provision in the group’s institutions are designed to run over several generations in order to cover surviving dependents' pensions. The BVK executive board and the advisory boards of the pension schemes have acted according to sustainability principles all along. Thanks to its size - at the end of 2019, investments totalled almost 82 billion euros - BVK has a very broad appeal.
The pension group has repeatedly proved itself to be an industry pioneer regarding the integration of ESG standards: in 2011, BVK not only decided to adopt an engagement strategy but was also the first pension provider in Germany to sign the United Nations Principles for Responsible Investment (PRI). In March 2020, BVK joined the Global Real Estate Sustainability Benchmark (GRESB), marking a further milestone. "As a global investor, it was important for us to use an internationally-recognized standard to measure the ESG performance of our real estate funds and managers," says Becker. The BVK thus shifted its sustainability strategy a gear higher through its fast-growing real estate division. In the security division, the group’s engagement projects and the exercising of voting rights through BMO Global Asset Management have provided the framework for ESG activities for some years now.
The pension group is currently busy getting its mandated asset managers to adopt GRESB standards. "The integration process is certainly costly but the cooperation between our specialist departments and the fund managers – some of whom have in-depth knowledge of GRESB - is working out very well," says Becker. "Our GRESB team comprises four managers from the real estate division who are charged with overseeing our global funds and funds in DACH (German-speaking) regions. We aim to require all our asset managers in the real-estate funds to comply with GRESB reporting standards.” Although Becker still has her work cut out implementing the new investment standard in the group’s day-to-day business, she already has her sights set on the next goal of developing the BVK climate strategy and looking into membership of the Net-Zero Asset Owner Alliance - a group of global institutional investors who are committed to achieving the Paris climate goals by 2050. "Through such alliances and networks, we can exchange valuable insights into ESG standards and at the same time receive considerable input, for example, in terms of know-how in data selection, data usage and scenario analyses," observes Becker. "Universal-Investment is a valuable and supportive partner who is always on hand to advise us.”
(published February 2021)
Author: Nicole Becker, BVK
Date of issue: 6/11/2021
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