Denmark’s Danica Pension said it is lowering the acceptable proportion of sales that a company it invests in can generate from coal and tar sands to 5% from 30%, and introducing a new bar on investment in companies involved in peat for energy production.
The DKK465bn (€62.5bn) Danske Bank pensions subsidiary also announced it was excluding 18 companies from its investment universe on human rights, corruption, environmental and other grounds.
Ole Krogh Petersen, Danica Pension’s chief executive officer, said: “We are convinced the future belongs to those companies that can adapt to a green future.”
The pension provider said the tightening of its climate restrictions was part of its goal to phase out investments in companies with activities within the three fuel types, at the latest by 2030 within the EU, and by 2040 for the rest of the world.
This was in line with the phasing-out plan in the Paris Agreement, Danica Pension said.
The pension firm said its newest restriction concerned firms involved in peat for energy production, and affected companies where this activity accounted for more than 5% of their sales.
Peat is a natural carbon sink, and releases carbon dioxide and methane when extracted and dried.
Danica Pension said it would not invest in firms expanding their tar sands capacity, or increasing energy production from coal or peat.
However, it said it would still allow itself to invest in companies with a turnover of more than 5% from coal, providing they lived up to level three of the Transition Pathway Initiative (TPI).
According to this definition, it said firms had to have a concrete plan to phase out such activities which complied with the phasing-out requirements of the Paris Agreement, establishing qualitative targets for the reduction of emissions – and full transparency about their lobbying activities within the climate agenda.
“It is at least as important that we use our muscles as an investor to influence companies to reduce their climate impact,” Krogh Petersen said.
He added that the firm would use the parameters of the TPI to assess which companies were willing to change, and focus its energies on them.
Launched in 2017, the TPI was established by the Church of England national investing bodies and the Environment Agency Pension Fund (EAPF), with its steering committee comprising asset owners including Swedish buffer funds AP1, AP2 and AP3.
Of the 18 companies Danica Pension said it is now adding to its blacklist, it highlighted Chinese firm Hikvision, which is being banned from the investment universe on human rights grounds, against the background of the supply of technology used for surveillance of the controversial camps where Uighur people are being detained.
Swiss-headquartered commodity company Glencore is being excluded because of its involvement in activities such as corruption and use of child labour, the pension provider said.