The largest of Sweden’s national pension funds has just announced it is adding seven more companies to its investment blacklist, with five of them being banned from the portfolio because of coal – and as a result of the fund’s latest development of its exclusion methodology related to the Paris Agreement.
AP7, which runs the default option in the first-pillar premium pension system, said its holdings in the seven firms were worth SEK284m (€27.7m) the day before it sold them.
The pension fund revealed the blacklistings as it published the latest version of its exclusion list, which is updated twice a year. The list now includes 93 companies.
The five firms newly blacklisted due to the Paris Agreement are China Power International Development; China Shenhua Energy Company; Huadian Power International Corp; Shanxi Lu’An Environmental Energy Development Co and TBEA Co, the pension fund said.
The other two newly-banned companies are the Finnish business Wärtsilä, because of involvement in the production of components for nuclear weapons, and Thai power firm Ratch Group Public Co, based on inadequate human rights management and compensation in connection with a collapsed hydropower plant in Laos, according to AP7.
Charlotta Dawidowski Sydstrand, sustainability strategist at AP7, told IPE: “These five companies on the list are all Chinese coal companies that are either involved in thermal coal production or electricity generation from coal.”
These were the “worst companies” that had the highest climate impact with the highest volume of coal, she said.
“And another thing is these companies are expanding their coal activity, so they’re using our capex in entirely the wrong direction,” said Dawidowski Sydstrand.
AP7 said its long-term mission – to create good returns for its savers – was dependent on the implementation of the Paris Agreement and that the global market had a long-term sustainable development.
The fund said it was pushing for the implementation of the Paris Agreement in all corporate governance processes, and was striving to get companies to reduce emissions through its ownership of them.
“We are pushing for companies to transition to a low-carbon economy, however there are red lines, and if we find that companies are acting in contradiction to the Paris Agreement – and our analysis shows they are not willing to change their behaviour then we will blacklist them,” said Dawidowski Sydstrand.
She said that this red line would continue to move as AP7 developed its Paris Agreement methodology further.
“We’re looking closely at the IEA net-zero pathway to 2050 – we’re quite clear that to start off with we need to phase out coal quite quickly,” she said.
AP7’s blacklisting model was a tool for active ownership, she said.
“Because we don’t just divest from these companies quietly – we engage with the companies beforehand so we write to them and give them our revision criteria – we’re very clear about what changed behaviour we want to see,” she said.
The sustainablity strategist said the pension fund flagged blacklisting intentions to companies at least six months in advance, and also published the names of the companies and the reason for the blacklisting on its website, which meant there was a “name-and-shame element”.
“We’re trying to influence the companies to change – it’s not a question of cleaning our portfolio from the wrong companies,” said Dawidowski Sydstrand.