ESG roundup: Danish pension funds sharpen climate focus

Pension funds in Denmark are working harder on the issue of climate change, spurred on since the signing of the Paris Agreement, according to a new report by WWF Denmark.

In a report, the environmental organisation ranked the 17 largest Danish pension providers according to their activity in relation to climate change. PKA was the pension fund doing the most, the 2017-18 report said, with 14 of the funds getting the same or a higher score than documented in the WWF’s 2016 report.

Hanne Jersild, senior adviser at WWF –  the World Wide Fund for Nature – said: “It is clear that several pension companies have an increased focus on climate, as a result of a combination of a the Paris Agreement, uncertainty about the future of fossil fuels and pressure from members and non-governmental organisations such as WWF.”

Since the investigation was completed in January, the pension funds had come out with several new climate-related announcements and initiatives, she said.

“This in itself shows there is growing attention being paid to the climate,” Jersild said.

In the report, pension funds were awarded up to two points for each of six categories, including integration of the Paris Agreement in investment policy, setting of investment goals for green energy technology and exclusions approach.

PKA – which topped the WWF’s ranking for the fourth year in a row – gained nine of a possible 12 points, followed by PFA with 7 points.

Lægernes Pension took the number three spot with six points. Several other funds also scored six, including ATP, MP Pension, Nordea Liv & Pension, P+ (the joint administration company for the pension funds JØP and DIP), PenSam and SEB Pension.

Peter Damgaard Jensen, chief executive of PKA, said: “We are very pleased with the recognition of our strategy. It underlines the fact that the combination of green investing, exclusion of the worst CO2 sinners and trying, at the same time, to make companies go in a more climate-friendly direction makes real sense – both from a climate and economic point of view.”

WWF Denmark said this year’s results were not directly comparable to those of the 2016 report as it had changed some of the categories, including introducing an active ownership criterion in place of a score for how much influence members or customers could have over a pension fund’s environmental stance.

PKA cuts 35 oil companies

Separately, PKA has announced the exclusion of 35 oil companies on financial and climate grounds, bringing the total number of oil and gas firms blacklisted by the fund to 40.

The new exclusions were made after conducting an investigation into action being taken by 62 oil and gas companies, in view of the Paris Agreement goal.

On top of the 35 companies now blacklisted, another 15 companies have been put under observation, the pension provider said.

PKA has already excluded 70 coal companies from its investment universe, and said would turn its climate-related focus to the car industry in the future.

Damgaard Jensen said: “An effective conversion of the transport sector is crucial for meeting the Paris Agreement. Automakers who don’t invest in the development of electric and hybrid cars will pose a financial risk, as electric cars will be more attractive to consumers in line with technological developments in the long run.”

The International Energy Agency has estimated that there needed be 600m electric and hybrid cars on the streets by 2040 in order to comply with the Paris Agreement.

PRI takes TPI under its wing

The Transition Pathway Initiative (TPI) is partnering with the Principles for Responsible Investment (PRI).

The PRI is to provide support and secretariat services to TPI, an initiative set up by the investment bodies of the Church of England and the Environment Agency Pension Fund (EAPF).

The partnership will also allow PRI signatories to access analysis generated by the TPI.

TPI offers an online tool that allows users to assess companies’ governance in relation to climate change issues and how aligned they are with international greenhouse gas emission reduction targets. The tool is provided by and available on the Grantham Research Institute website.

The institute has analysed cement producers, steel makers, paper producers and car manufacturers.

TPI is chaired by Adam Matthews, of the Church of England Pensions Board and Church Commissioners, and Faith Ward, chief responsible investment officer at the Brunel Pension Partnership, on behalf of the EAPF.

TPI is also to be overseen by an international asset owner steering group.

Ward said: ”The partnership between TPI and PRI will provide us with the infrastructure to make the most of the great analysis and support a wider group of investors to get to grips with the climate transition risk.”