“The recipe for a successful green transition is that the biggest carbon emitters switch to greener alternatives as soon as possible,” says Mads Steinmüller. He is Chief ESG Specialist at Danica Pension and explains that this is one of the most important reasons why in 2021 we set specific carbon emissions reduction targets for 2025. We have done this for our investments in the five industrial sectors with the biggest carbon footprints.

”It is basically a question of companies being prepared to think and act green, and as a major pension provider, we can help accelerate that process.”says Mads Steinmüller, Chief ESG Specialist, Danica Pension

“We can make the biggest difference to the green transition by taking action against the companies that account for most of the damaging climate impact. This is one of the keys to meeting our 2025 targets and the long-term goal of making all our investments carbon neutral by 2050. It is basically a question of companies being prepared to think and act green, and as a major pension provider, we can help accelerate that process. This approach is also instrumental in protecting and increasing our customers’ pension savings and contributing to a greener future.”

Here Mads Steinmüller points to what is known as “active ownership”, where we engage in dialogue with companies in which we invest or vote at their general meetings. The aim is to induce them to lower their climate impact and align with the goal of the Paris Agreement to keep global warming within 1.5^oC.

Positive takeoff

If we take a look at the 30 companies emitting the highest levels of CO₂ in the five sectors, some of them have already set specific carbon emissions reduction targets and implemented action plans. This applies to, among others, Maersk and the energy and utility companies RWE, Enel and Iberdrola, all of which have signed up to the Science-Based Targets initiative, which ensures that the climate plans are in line with the Paris Agreement. In addition, ThyssenKrupp, American Airlines, Ford and General Motors also joined the standard in 2021 and are now about to set specific short and long-term targets.

According to Mads Steinmüller, the pressure from investors – along with tighter legislation and changing consumer habits – is an essential component of influencing companies to engage seriously in the climate change agenda.

“For years, we have been discussing climate issues with the companies, and when we, as a major pension provider, continue to place the green transition on the agenda, the vast majority of companies listen. We can see that the dialogue has an effect, as shown by the fact that Iberdrola, Maersk and more have drawn up road maps to comply with the Paris Agreement. For us, it is all about supporting utilities like RWE and Enel in making a shift to greener practices in the same way as Ørsted. And as a signatory of Climate Action 100+, we have also joined forces with upwards of 600 international banks and pension providers to make the world’s largest companies curb carbon emissions.”

Will make demands to speed up the transition

Quite a few of the 30 largest carbon emitters have not yet formulated specific and ambitious climate plans. Many either have no ambition of carbon neutrality, have not set a Science-Based Target or have unambitious climate plans. This applies to large companies such as Honda, Toyota, Shell, BP, Lufthansa and Gazprom.

“Letters of intent and unspecific targets are things of the past. Although many of these carbon emitters are large companies that will have to spend a long time on the transition, they need quantifiable targets and plans. Otherwise, I do not think they will move quickly enough. We simply need to see detailed targets and plans from many of the largest carbon emitters specifying how they will reduce carbon emissions, switch to renewable energy and climate-friendly transport or become better at recycling and reusing materials on the basis of circular principles.”

That is why it is our intention in 2022 to increase the pressure and contact companies and demand that they set targets for their green transition.

“For example, we want Toyota to come up with a specific plan for phasing out the manufacture of fossil-fuelled cars and to present a proper road map in alignment with the Paris Agreement. We will request similar climate plans from companies in the energy, utilities and transport sectors, and many companies have a lot of work ahead of them, and they need to be ambitious. If not, the consequence may be that we exclude the companies as they will be poor investments in the longer term and fail to meet our climate targets,” Mads Steinmüller concludes.