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Baden-Württemberg excludes US government bonds from its holdings, reports Bloomberg.
This is because the US government is not meeting the state’s new ESG standards.
Baden-Württemberg has inventories worth around 17 billion euros. The impact on the government bond market is expected to be minimal.
Baden-Württemberg sells US government bonds from its holdings because the US government does not meet the state’s new criteria for sustainable investments. That reports Bloomberg.
At the beginning of the year, the federal state passed a law that would affect the allocation of its around 17 billion euro investments Environment-, social and governance criteria on the same level as profitability and liquidity. Investment decisions must now be based on the UN Sustainable Development Goals, the EU Taxonomy Regulation and the Paris Agreement on climate change.
Other countries now on the wrong side of Baden-Württemberg’s rules include Finland, Latvia and Greece. The US violated the guidelines by failing to ratify several treaties, including those affecting women’s rights and certain types of guns, according to Bloomberg. In the SDG-Gender-Index 2022which measures the empowerment of women and girls, ranks the United States 38th in the world.
Meanwhile, the US has not ratified the Nuclear Weapons Ban Treaty. Then-President Donald Trump declared in 2019 that the US had “not signed” the Arms Trade Treaty. Trump also withdrew the US from the Paris Climate Agreement, which the US rejoined after President Joe Biden took office.
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“The only way that is simple and objective”
Arnim Emrich, the head of Baden-Württemberg’s finance and wealth management, admitted to Bloomberg that banning certain investments on the basis of international treaties is “a rather blunt approach”. “But it’s the only way we have that’s simple and objective,” Emrich added.
Baden-Württemberg is not the first federal state to pass similar ESG laws. Schleswig-Holstein already has a law, the American one government bonds prohibits. However, Germany is unlikely to have a major impact on the US bond market. Overall, German government bond holdings total $85 billion compared to the $24 trillion government bond market.
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This text was translated from English by Hendrikje Rudnick. You can find the original here.