What has been your experience with the development in the climate agenda?

In general, the entire sustainability agenda has undergone a process of maturation in recent years. Business leaders know that moving in the direction of sustainability is essential to having a future as a business. We’re a part of that movement, and it’s opened up an increasing number of opportunities for investing in supporting the green transition of companies, which in turn supports positive societal development.

Have you and your team changed the way you view investment?

The climate and the general ESG (environment, social and governance) area have developed significantly, and this will only continue. To meet the new demands required of us, we’ve had to step up and become even more astute at linking ESG aspects with investment-related parameters. Over the years, we’ve increasingly systematised this by utilising ESG data and models in the investment process, and this has given us a better long-term perspective and overview of the risks and opportunities that the green transition entails. Ultimately, this has better equipped us to invest in the right way so that we can both generate solid returns and also participate in the green transition. 

Learn more about our investments in the green transition

What kind of investments have you and your team been focusing on?

The green bond market in particular matured very quickly, and by the end of 2023 we had invested DKK 34.3 billion in this market. For the most part, this investment has been in corporate bonds, but we also invested in Denmark’s first green bond. We view this type of bond as an effective way of making a positive impact because there are clear frameworks and criteria that ensure that the money from green bonds is used to finance climate initiatives.

How else have you and your team approached the green market?

We’ve had positive experience of getting involved in transition cases. These are case where companies are in the process of fulfilling their transition plans, so there are perspectives for attractive returns as well as a positive effect for the climate. There are also opportunities in the so-called alternative investments, such as wind farms and other climate projects, which have otherwise been facing difficulties in the past few years. 
Most recently, we made a co-investment in the German offshore wind farm Borkum Riffgrund 3, which is expected to be operational in 2025. We have invested more than DKK 340 million in the project that is led by Ørsted from Denmark and Glennmont Partners from the UK. It will be one of Germanys largest wind farms, with a capacity of 900 MW and capable of providing electricity to approximately 900,000 households.

Is it possible to combine investment returns with societal responsibility?

I clearly believe that we as a pension company have a generational responsibility. What I mean by this is that we can help shape a future where it makes sense to save up for and have a good life. That’s our ambition, and I definitely believe that it’s possible for us to balance this with delivering solid returns to our customers. This is reflected in our basic philosophy of looking to find investments that are leaning towards the transition because they’re also attractive in terms of the returns they can generate.”

Poul Kobberup, Chief Investment Officer,Danica Pension

The green transition has been struggling in recent years. How are you dealing with that?

Yes, it’s suffered some blows over the past few years with the energy crisis, wars, geopolitical tensions and elevated interest rate levels, inflation and commodity prices. This has made the transition more complicated and created more bumps along the way, but it won’t stop it. It’s already well under way because businesses in large parts of the world are already on board with the transition – and they’re not going to turn back. Inflation, commodity prices and electricity prices have also begun to recover, and this might reinvigorate the transition. You have to remember that as a long-term investor we focus on capturing trends and investing in projects and companies that are relevant over the long term. So I’m optimistic and see good opportunities to manoeuvre in the new reality.

In your view, what role in the transition do politicians play?

Basically, they need to ensure stability and a clear direction so that companies and investors such as ourselves have the incentives to get involved with the transition. Among other things, this means that they must create the right framework, conditions and structures so that the green transition is market-driven and investment conditions are reasonable. Private companies and investors need to be able to see that there are business opportunities in the transition, otherwise we run the risk that the pace of transition will be too slow.

Does it concern you that several countries in Europe are beginning to backtrack on their climate ambitions?

Both yes and no. Political wavering is never good because it creates uncertainty that can cause investors and businesses to put the brakes on. On the other hand, we see that businesses and consumers have generally committed themselves to the transition and are helping to drive it forward. The transition is progressing at full speed in China and the USA, with clear backing from both countries’ governments. The USA has introduced a billion-dollar green stimulus package through its Inflation Reduction Act, which acts as an economic incentive to climate action. And China is focusing massively on developing solar and wind energy, among other things. We invest globally, and from this perspective my outlook for the future is positive, and I expect that there will continue to be transition cases that are attractive from an investment perspective.

Where do you expect to see increased activity in the future?

We expect to see a lot of activity around alternative investments, which can cover investments in wind turbines, solar cells and other climate-related projects. Today, we’re seeing that an increasing number of green transition projects around the world, such as renewable energy projects, are beginning to become more viable as investment opportunities as a result of measures such as subsidies and generally improved economic structures and frameworks. Part of this includes the fact that renewable energy has become a matter of national security policy and energy security in many countries, and this will only push development further and hopefully result in more projects that merit investment. But it’s also necessary from a national government perspective to develop and improve electricity grids and other energy infrastructure, otherwise there’ll be fewer renewable projects and the investment case will be more uncertain.

Will you continue to focus on green bonds?

I expect that the supply of green bonds will continue to grow because businesses are using them as a means to finance things such as energy-efficiency initiatives, new production facilities powered by green energy, or the development of green solutions. So this is definitely an area where we’ll likely increase investments from our side.

What's your view on shares and listed companies?

Our focus will be on transition companies. In other words, finding the companies that have a strong business case in transitioning their production facilities or developing products with a lower carbon footprint. It is an ongoing process where we’re monitoring the market closely and continually adjusting equity investments so they’re beneficial for our customers’ pension savings and also the climate.

So do you think that it’s possible to reach DKK 100 billion invested in the green transition by 2030 and still deliver attractive returns?

Yes, I’m certain of that. Businesses have set the direction, and I believe that this will serve to accelerate the climate agenda in future. And this fact means that we’ll see many attractive investment opportunities in future where solid returns and the green transition go hand in hand.

Disclaimer: This publication has been prepared as marketing communication for information purposes only, and it is not to be relied upon as investment, legal, tax or financial advice. Always be aware that historical returns are not an indication of future returns, which may be negative. Always consult with professional advisers as to the legal, tax, financial or other matters relevant to the suitability and appropriateness of an investment.