The investment arm of the Danish pension fund for academics, MP Pension, has won a DKK1.7bn (€227m) Danish equities mandate from pension fund manager LD Funds – mainly on the strength of its sustainability and active ownership approach.
LD Funds announced that MP Investment Management (MPIM) will take over its Danish equity portfolio from the current manager C WorldWide as early as the first quarter of 2020.
LD Funds, which manages two pension funds, said MPIM would initially manage DKK1.3bn of investment from the sub-fund LD Danish Equities – available to members of the Lønmodtagernes Dyrtidsmidler pension fund – plus LD Funds’ strategic allocation to Danish shares of around DKK400m.
Lønmodtagernes Dyrtidsmidler is a non-contributory pension fund based on cost-of-living allowances granted to a cohort of workers at the end of the 1970s. Alongside this, LD Funds is now managing the new Lønmodtagernes Feriemidler fund which starts up this year and will hold a year’s worth of holiday allowances given to workers after a change in the way holiday time is accrued in Denmark.
LD Funds currently manages DKK35bn stemming from the cost-of-living allowances, and the holiday fund will involve a total of around DKK100bn, part of which will be invested in securities with the other part held by employers as debt.
Over the next few years, LD Funds said the portfolio MPIM will manage may be expanded with investments for Lønmodtagernes Feriemidler, whose investment strategy is currently being prepared.
Back in July when inviting tenders, LD Funds said the mandate was to be managed actively, with a long-term investment horizon, with the investment process including both financial, strategic, and ESG criteria and research.
Seven Danish asset managers competed in the public EU tender which closed last August, said LD Funds, adding that the bidders had been close in terms of price and quality.
“These are complex matters that require deep insight to be a professional counterpart for the companies”
Anders Schelde director of MPIM and CIO of MP Pension
However, it said the decisive factor had been MPIM’s work with active ownership and integration of sustainability requirements into the investment work.
Charlotte Mark, chief financial officer of LD Funds, said: “MPIM has worked with integration of sustainability in stock selection and active ownership for many years and is far ahead of many of the other potential asset managers.”
MPIM, which already manages just over DKK131bn for MP Pension as well as several other professional Danish investors, said that with the new LD Funds mandate, it would now bolster its organisation and processes further to deepen dialogue with companies on corporate governance and sustainability.
“These are complex matters that require deep insight to be a professional counterpart for the companies, so it really is a pleasure that we can now allocate extra resources to this,” said Anders Schelde director of MPIM and CIO of MP Pension.
Mark said her firm had been very happy with its partnership with C Worldwide.
“It was a tough competition where C WorldWide also came up with a very qualified offer,” she said.
Equinor fails to win back MP Pension with new climate targets
Separately, MP Pension said it was sticking with its decision to exclude Norwegian oil company Equinor – formerly Statoil – despite the energy firm’s new goals to reduce greenhouse gases emitted by its operations published on Monday.
“With the new steps that Equinor has announced, they are becoming more compliant, and that is good, but they are not there yet in our view,” said Schelde, adding that the stock would remain on MP’s exclusion list.
He said that when MP Pension recently decided to divest 10 of the world’s largest oil firms, four of them – BP, Royal Dutch Shell, Total, and Equinor – had been deemed to be at various stages on the way towards compliance with the Paris agreement.
Though it was good that the steps outlined by Equinor addressed their scope 1 and 2 emissions, Schelde said, he added that MP Pension expected all companies in all sectors to work diligently and set ambitious reduction targets by 2050.
“The steps taken by Equinor may perhaps stand out as ambitious within the fossil extraction sector, but less so when you compare across all sectors,” he said.
The Danish pension fund also expected fossil fuel firms to consider their scope 3 emissions, and have a thorough business strategy and risk management set-up to navigate the various scenarios of the coming green transition, he added.
“Not least for a producer like Equinor who is not a low-cost producer, and who does not have a large natural home market to sell into, it is important to be conscious of the business risk,” Schelde said.
In April last year, Equinor won plaudits from some asset managers for commiting to take “significant additional action” on climate change.