“As a pension provider with assets under management in the order of DKK 500 billion, we can make a huge difference when it comes to the green transition. We are already focusing on this today, having almost tripled our investments in the green transition between 2019 and 2020 from DKK 10 billion to DKK 27 billion, and having committed more strongly to our active ownership with the aim of taking the companies in which we invest in a more sustainable direction,” says acting CEO of Danica Pension Søren Lockwood and continues:
“It is good to set long-term ambitions, but it is even more important to take timely action. Our ambition is to contribute to real economic changes and to the green transition. If we are to contribute to solving the climate change challenge, we believe that it is also necessary to support the transition in the sectors that are key to driving the change.”
As a result, Danica Pension has now set new interim targets for our investments with the focus on reducing carbon intensity in key sectors by 2025. They include the energy, utilities, transport, steel and cement sectors. Danica Pension’s ambition is to reduce carbon emissions in these key sectors by between 15 percent and 35 percent – and that is relative to the level of 2019 when carbon emissions from Danica Pension’s equity and credit portfolios were 21 percent below the MSCI World Index. If we take a look at equities alone, carbon emissions from Danica Pension’s investments were 38 percent below the world index. Scope 1, 2 and 3 emissions are included:
“The five sectors represent the greater part of global carbon emissions, which is why they play a key role if we are to succeed in limiting global warming and meet the goals of the Paris Agreement. Utilities account for about 26-39 percent, transport about 15-23 percent and steel production about 5-7 percent of total carbon emissions. As the five sectors also represent the top carbon emitters in our portfolios, we think it is only natural to take action here where we can make the biggest difference to the climate,” says Søren Lockwood.
Propelling change through active ownership
Active ownership will be the primary key to achieving the targets. Focus will be on direct dialogue with the companies, dialogue through partnerships with other investors (for instance Climate Action 100+ and Net Zero Asset Owner Alliance) and our voting activities.
Besides, we will continuously assess the possibilities of reallocating our investments and continue to increase our investments in the green transition. In cases where we estimate over time that the companies do not want to change, we can choose to divest,” says Søren Lockwood .
“We are increasing our investments in the green transition significantly because it is beneficial to the society we are part of and because we are convinced that a link exists between investments in the green transition and attractive returns for our customers. This is because demand for green solutions is massive after the conclusion of the Paris Agreement and we expect continued growth in demand, especially now in the wake of the corona crisis where we are seeing huge support for a green restart of the economy.”
Danica Pension has managed to invest in the green transition while delivering attractive returns, which has for instance been demonstrated by our ability in both 2019 and 2020 to generate net returns at the top of the market.
“We can see that the substantial increase in our investments in the green solution has not compromised the level of returns. It is important that we have ambitious goals for the green transition, but also that we ensure it goes hand in hand with attractive long-term returns. Through our investments, we want to contribute to ensuring that we pass on a sustainable world to future generations, but also, of course, to provide financial security by way of attractive returns on individual customers’ savings for their retirement,” says Søren Lockwood.
Although Danica Pension will focus massively on the green transition in the years ahead, it is important to point out that investments in this area will not triple every single year.
“Promoting the green transition as a large-scale investor with assets under management close on DKK 500 billion is not only a question of how much we invest, but also about, for example, active ownership and use of data, tools and analyses to facilitate the green transition in the large energy companies and elsewhere, so this is another focus area for us,” says Søren Lockwood.
Danica Pension customers who want to make an investment choice with a special sustainability focus have the option to invest all or part of their pension savings in Danica Balance Sustainable Choice, which you can learn more about here.
Fact box: Danica Pension’s investments in the green transition
It is Danica Pension’s ambition to invest DKK 100 billion in the green transition by 2030. The interim targets are DKK 30 billion by 2023 and DKK 50 billion by 2025.
Danica Pension has made the commitment that its investments, today in the order of DKK 500 billion, will be carbon neutral by 2050. In the near future, we will present interim targets for 2025.
At the end of 2020, Danica Pension had invested DKK 27.2 billion in the green transition. That is almost a threefold increase in one year.
Investments in the green transition are:
- Alternative investments in sustainable energy, such as biomass, hydro power, wind and solar energy.
- Green bonds that finance solutions and products within renewable energy, environmental pollution control, clean water, waste and sewage management, energy efficiency, etc.
- Certified sustainable properties complying with the strict requirements for low climate and environmental impact.
- Equity and credit investments in companies that deliver products, technologies or solutions helping prevent climate change.