The chief investment officer of Denmark’s largest commercial pension fund has published a justification of the DKK688bn (€92bn) firm’s continued investment in oil, gas and coal, in the face of recent criticism from non-governmental organisations (NGOs) in the local media.
Kasper Ahrndt Lorenzen, who left his former CIO role at ATP to lead PFA’s investment operation last September, said in a commentary: “It would not necessarily do any good for the climate if we sold out from one day to another.”
PFA was responding to an article in Danish financial daily Børsen on 30 March, in which, the firm said, a number of NGOs had criticised it for having investments in fossil fuel companies.
Ahrndt Lorenzen said PFA backed the Paris Agreement 100%, and that the climate pact was deeply integrated in everything the pension fund did.
“Over the past few years, we have invested heavily in the green transition, including in the world’s largest offshore wind farms, and if you look at our equity portfolio alone, it emitted 16% fewer CO2 emissions at the end of last year than the world index,” he said.
PFA was fundamentally convinced that investing in companies with sustainable business models was sound business logic, he said, because accountability and good returns were increasingly prerequisites for each other.
But while divesting fossil fuel companies could help PFA avoid critical media headlines in the meantime, he said, selling out rapidly would not necessarily help the climate.
“At PFA, we exercise active ownership, where we critically and constructively engage with the companies we are co-owners of,” he said, adding that the firm believed this the most effective way to support sustainable development.
“We do this on our own and in collaboration with other large investors. Here we find that many companies are susceptible to improvement. And if they are not, then we divest from them,” he said.
Ahrndt Lorenzen argued that if PFA sold a stake, then there were others who would buy it.
“And there is no guarantee that the next buyer will take the climate challenge as seriously or engage in the green transformation as we do,” he said.
Fossil fuels were part of the energy mix of the coming decades, the CIO said, even in the most optimistic scenarios about the evolution of CO2 emissions, adding that this was also why the political side was not demanding a shutdown of fossil energy.
“The reality is that regardless of whether PFA completely sells shares in oil companies or not, the Danes will still buy bananas in the supermarket and transport themselves,” said Ahrndt Lorenzen, illustrating that demand for fuels will continue.
However, he said, PFA listened to different attitudes about how, as a pension company, it could best support green development.
For customers who wanted an even more climate-focused pension plan, he said, the new PFA Climate Plus investment option – which will not include oil, coal or gas companies – would be available from this summer.