Responsible Investor

Metallrente shows the way on RI in Germany

Country’s fastest growing fund explains why RI is a gradual but growing process amongst German peers.

In responsible investment terms, Germany is a contradiction. The country, considered by many as one of the cradles of environmentalism, is a long time champion of domestic recycling and one of the world’s most prolific builders of sustainable housing. Yet German institutions are amongst the European laggards in adopting environmental, social and governance approaches into investment.
By contrast, German Chancellor Angela Merkel, a former environment minister, has been a driving force behind EU efforts to cut greenhouse gas emissions and switch to renewable fuels. A recent update on a 2005 report by SD-M, Sustainable Development Management, in conjunction with Swisscanto, the Swiss fund manager, found little change to its original findings that just one in 20 German pension funds had a “very good” understanding of sustainable investment. This despite 65% of German investors telling the survey they now believed the return potential of sustainable investments was similar to that of conventional strategies. The lack of SRI take-up so far by German investors comes despite the integration of sustainability reporting for pension funds in the 2005 Act on the Supervision of Insurance Companies. The SD-M report said there were notable German SRI exceptions.

These include the €260m ($383m) Gothaer Pension fund, The €134m Gerling pension fund, the €49m Hannoversich pension fund, the Hamburg Mannheimer pension fund, the Victoria Pension fund and Metallrente, the pension fund for the German metal industry. Metallrente is one of Germany’s fastest growing pension fund managers with more than 250,000 members and over 13,000 constituent companies. The fund runs €1bn plus in contributions, diversified across insurance companies and asset managers. Capital is expected to grow by some €300-400m per annum. Launched in 2002, MetallRente offers three forms of pension administration: equity-oriented pensionsfond DC plans, direct insurance (direktversicherung) and a Pensionskasse, a traditional German insurance-linked DC fund. Heribert Karch, managing director at Metallrente says it focuses on SRI in its equity-based pensionfond plan, where the system most resembles an Anglo Saxon pension fund arrangement and SRI can be bolted on. Metallrente is no stranger to SRI though, particularly in social matters, which is seen as important as environmental issues in a traditional blue-collar industry where social partners – employers, employees and trades unions – have input into the fund’s investment decisions.

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