Non-transparent business practices – insight into the German state pension system

The Versorgungsanstalt des Bundes und der Länder (VBL) insures 4.9 million contributors in Germany – it is the largest provider of company pensions in the public sector [1]. The employees are compulsorily insured, they cannot freely decide which institution they leave their pension provision to. Unfortunately, the VBL refuses to disclose its investments. This combination of compulsory contributions and non-transparency makes it impossible for investors to know where their money is flowing, let alone if their money is being managed sustainably and in accordance with human rights.

The VBL is simply not dependent on disclosure, since its customers have no choice but to take out insurance with it. However, the lack of transparency also suggests that established standards are not being met, investments are being made in controversial companies, and environmentally and ethically unsound business practices are being kept under wraps. Through more transparency, VBL could regain lost trust and generate approval.

According to its 2019 annual report, VBL has €25.7 billion in assets [2], of which €25.2 billion are invested in stocks, shares, and other non-fixed income securities, primarily in multi-asset funds (€23 billion) [3]. What remains unclear: in which industries and companies are invested and what the investment strategy of the mixed funds is.

On its website, VBL presents measures to reduce “adverse sustainability impacts” [4]. This means adjusting investments to the potential risks of climate change. One is a “physical risk” such as global warming, forest fires, water scarcity, and the other is a “transitory risk” arising from the adaptation of economic sectors to climate change, e.g., firms with high carbon emissions [4]. On paper, these objectives look reasonable and necessary, but when looking at the concrete measures, this impression quickly evaporates. The VBL does not have a single concrete measure that reflects sustainability in terms of climate.

It talks only about the implementation of a potential concept to exclude companies whose business model is predominantly coal-based. In addition, the MSCI ESG rating is to be used in the future as a measurement tool for financially relevant sustainability risks for the analysis of investments [4]. While these approaches would be useful, they cannot serve as the basis for an assessment until they are put into practice. Central to the sustainability strategy is VBL’s “engagement approach”, which aims to make use of shareholders’ rights to bring issues such as climate protection, ILO standards, SDGs, and other principles to the fore at general meetings. Companies are to be moved to more sustainable corporate practices through this pressure [4]. However, this voting policy is outsourced to Deka-Bank [10]. Thus, VBL itself is not responsible for compliance with the standards. It is not disclosed which motions are introduced by the VBL or the service provider and whether they prevail in the general meetings [10]. According to research by Bürgerbewegung Finanzwende, VBL holds a relevant stake in only three companies, which could influence business practices [6]. The engagement approach of investors can be useful and effective, but it is never a substitute for mandatory environmental and social standards.

The VBL has formulated a few specific exclusion criteria, such as serious and systematic violation of human rights and/or ILO core labor standards, as well as a ban on investment in companies producing weapons outlawed by the UN. A crucial point is the lack of transparency. Without verification of sustainability criteria by external actors, any self-imposed standard is not comprehensible.

With its sustainability strategy as it currently stands, VBL is greenwashing, according to Facing Finance. In a study by the University of Califonia at Berkley, two core criteria for greenwashing were identified [5]. Firstly, a “poor environmental performance”, which the VBL at least cannot refute due to the lack of transparency and standards; secondly, a “positive communication about environmental performance”, which can be seen from the “sustainability-related information” on the VBL website – the impression is created that the VBL attaches great importance to sustainable investment, but in practice, there is no reliable evidence of this [4].

The VBL is a public institution that forces employees to enter into an insurance relationship. With this administrative power, it is subject to state control and thus, by proxy, to the control of citizens. The Federal Ministry of Finance supervises the VBL and thus acts as a controlling authority [6]. The ministry appoints one person to the three-member full-time board, which decides on the specific investment strategy, and provides half of the members of the 38-member board of directors, which decides on the guidelines for investment [6]. The federal government actively helps determine corporate practice. If there were a political will on the part of the federal government to achieve its own set goals of climate neutrality by 2045 [7] and the new orientation of the financial markets [8] toward “sustainable finance,” this could be implemented in the VBL in an exemplary manner. As a state provider, the VBL should be a model for state pension schemes in other countries as well as for private insurance companies.

Facing Finance e. V. campaigns internationally for a more responsible and sustainable approach to money. We support the call of the SustainVBL initiative and share its demands to VBL: transparency about all investments of VBL, the development of and compliance with mandatory environmental and social standards, and the fundamental exclusion of investments in coal, natural gas, oil, and nuclear energy from VBL’s portfolio [9].


You can support the open letter to VBL as an institution and/or individual!

Write a protest mail to VBL via the campaign VBLforFuture?

Author: Nils Jansen



[2] S. 112

[3] S. 119


[5] S. 67