Dutch pension giant PGGM says “very few” fossil fuel companies are set to survive its divestment programme, which evaluates the credibility of climate transitions in the oil and gas sector.
The €229bn asset manager for Dutch healthcare scheme PFZW began assessing its oil and gas holdings at the start of 2022 and has already exited 192 companies.
The lion’s share of those sold, representing some €470m of PGGM’s portfolio, were axed last Spring for not having carbon reduction targets. A further €303m of investment was ditched in a second phase, which screened out firms whose targets did not include an explicit commitment to the Paris Agreement.
Later this year, the fund said it will sell off any of the remaining 94 fossil fuel firms that are not implementing a credible net zero strategy.
Together, the 94 represent €2.7bn of investments for PFZW. Of those, PGGM is conducting intensive shareholder engagement with the 12 it feels are most likely to transition to net zero, including Shell, Total and BP. It has more than €1bn in those 12 companies.
Andres van der Linden, a senior responsible investment advisor at PGGM, said that only a handful were expected to survive the final filter.
He told IPE that some of the conversations with the oil and gas companies had been “really heartening”, but when asked how many will meet the fund’s criteria and remain in the portfolio into 2024, he said: “There are very few that stand a chance at the moment”.
PFZW’s decision to exit fossil fuel companies that were not meaningfully pursuing a net zero transition followed a lengthy period of engagement with the sector, including through the collaborative engagement initiative Climate Action 100+.
As well as seeking to avoid the financial risks posed by potentially stranded assets, van der Linden said the divestment approach reflected a growing desire by many of PFZW’s beneficiaries not to profit from the oil and gas business as the climate crisis worsens.
A number of other Dutch asset owners and their managers have made high-profile divestments from fossil fuels in recent years. ABP has been exiting the sector since 2021. According to its website, it sold €15bn (3% of its total assets) earlier this year in a bid to align its portfolio with current climate science, which says that most new oil and gas is incompatible with reaching net zero by 2050.
Hospitality fund Horeca & Catering, and PME, the pension scheme for the country’s metals and technology sectors, have also ditched fossil fuel securities. In March, IPE reported that Pensioenfonds ING, the €26bn pension scheme of ING Bank, had sold a large chunk of its fossil fuel holdings last year.
The trend can also be seen outside the Netherlands: the Church of England recently confirmed that its three investment bodies would be completely out of the sector by the end of 2023. Norway’s sovereign wealth fund – the biggest in the world – has also committed to reduce its exposure to the sector.
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