Major Dutch pension investor APG has sold its stake in South Korean utility KEPCO because the majority government-owned company is continuing to pursue new coal-fired power plants.
Including KEPCO, it exited its position in eight other companies in 2020 because they had plans for new or larger coal-fired power plants, APG revealed on Friday.
It said it decided to sell its stake in KEPCO after the company gave the green light to the construction of new coal-fired power plants in Indonesia and Vietnam.
APG had tried to get the company to change its mind.
“We pulled out all the stops,” said Yoo-Kyung (YK) Park, sustainability specialist at APG Asset Management. “We wrote letters to management, increased the pressure in the media and worked together with civic organisations.
“Because 51% of KEPCO is owned by the Korean government, we also liaised with other investors to approach the government on its responsibility. Unfortunately, that didn’t work out.”
KEPCO’s decision on the new coal-fired power plants had been “a litmus test” for the company’s commitment to the Paris Agreement, she said.
APG and other institutional investors have had success in persuading large lenders in South Korea to stop financing new coal-fired power plans and to tighten their climate ambitions.
“South Korea is a signatory to the Paris Climate Agreement,” YK said. “But despite many promises, the country is still one of world’s largest carbon emitters. Through pressure on the financiers of coal-fired power plants, we are trying to change that.”
APG’s main client, civil service pension ABP, has a target to achieve a net-zero portfolio by 2050, and its other asset management clients also have climate targets.
A spokesman told IPE that APG had held €3.4m in equities in KEPCO.
Aviva Investors sets out climate engagement escalation programme
Aviva Investors today announced a climate engagement escalation programme according to which it will fully divest in-scope companies, including debt positions, if their actions do not meet the asset manager’s expectations.
The programme focuses on Aviva’s investments in 30 companies identified as “systemically important carbon emitters” in sectors such as oil and gas, metals and mining, and utilities.
Expectations formulated by Aviva include that companies adopt a goal of achieving net-zero emissions by 2050, set short- and medium-term climate targets and milestones, align management incentives to climate goals, and commit to the Science-based Targets Initiative framework.
The programme will run for between one and three years, depending on individual company circumstances, Aviva said. Progress is to be monitored on a six-monthly basis, at which point the asset manager will determine the need for escalation.
This could include votes against directors, the filing of shareholder proposals, and “working with aligned stakeholder groups to apply further pressure”.
Companies that fail to make sufficient progress at the conclusion of the programme will trigger full divestment, which will apply to across the asset manager’s equity and debt exposures, it said.
“Aviva Investors’ ESG philosophy promotes the relative merits of engagement over divestment as the more effective mechanism of delivering positive change and outcomes for our clients and society,” said Mirza Baig, global head of ESG research and stewardship at the asset manager.
“Engagement provides us the opportunity to partner with companies as they navigate the challenges of transition. However, for our engagement approach to have impact, it must be accompanied by a robust escalation process, including the ultimate sanction of divestment.”
Colin Purdie, CIO for credit at Aviva Investors, said creditors had an increasingly important role to play in helping to deliver climate change mitigation and transition, as well as addressing wider ESG concerns.
Smart Pension targets net-zero ‘well’ before 2050
UK master trust Smart Pension is committing to achieving net-zero emissions “well ahead of the 2050 deadline”, it announced today.
The £1.5bn (€1.7bn) pension provider said it was signing up to the Make My Money Matter (MMMM) campaign, thereby “pledging to go faster and make changes well in advance of what’s being asked”. It is also pledging to halve its emissions “significantly earlier than the 2030 deadline”.
Asked about further details, a spokeswoman said: “There are a number of live conversations with a number of exciting funds that are looking at joining the master trust and we will be releasing more information over the coming months.
“We felt it important to announce our commitment to MMMM and we are currently working out the detail.”
In its statement, Smart said it would make allocations to a new Social Impact Fund, which would “capture investment opportunities that offer solutions to broader environmental and social challenges”, and work on initiatives to strengthen its fund range to offer members more climate-friendly options “that actually decarbonise the world economy”.
According to the spokeswoman the allocation to the Social Impact Fund will be around £100m.