Divested from 170 companies on climate grounds in 2021

In 2021, we introduced stricter climate requirements and divested from companies with revenue of more than 5 percent from coal and tar sand unless they have a clear phasing-out plan. We also sold off investments in the oil giant Exxon and other companies that are harmful to the green transition.

Coal and tar sand companies are some of the worst climate offenders and will be poor investments for our customers in the longer term as coal and tar sand are not the energy of the future. In other words, this kind of company is bad not only for the climate, but also for our customers’ pension savings.

In 2021, we therefore lowered our threshold in terms of the percentage of a company’s revenue that may be generated from coal and tar sand. This meant that we stopped investing our customers’ pension savings in companies where more than 5 percent of revenue comes from coal and tar sand. Previously, the threshold was 30 percent. The result was that we excluded another 163 coal and tar sand companies in 2021.

“We are confident that the future belongs to the companies that transform their business models into green practices. The stricter requirements are therefore instrumental in future-proofing customers’ savings,”says Quinn Liu, ESG analyst at Danica Pension

“Fossil fuels are increasingly being replaced by green alternatives, and the new approach helps to support this development. It sends a clear signal that we want to do our part in combating climate change and supporting the transition to a zero-carbon economy. We are confident that the future belongs to the companies that transform their business models into green practices. The stricter requirements are therefore instrumental in future-proofing customers’ savings, enabling us to offer them a financially secure retirement,” says Quinn Liu, ESG analyst at Danica Pension.

We have also set a deadline for when we will no longer have investments in coal and tar sand. In EU and OECD member states, the deadline is 2030, whereas it is 2040 for the rest of the world, which is in line with the climate action plan under the Paris Agreement.

Facts

 In 2021, we lowered the threshold for our investment in coal and tar sand.

  • Going forward, not more than 5 percent of companies’ revenue may come from the two energy sources.
  • Today, 367 companies engaged in coal and tar sand are on the exclusion list.

Excluded Exxon

“Basically, we would prefer to keep our investments in companies as this allows us to nudge them in a climate-friendly direction. In our view, this will make the biggest real difference to the green transition”, Quinn Liu emphasises. But if there are no prospects of the company improving, we draw a line in the sand and sell off our investment in the company and put it on our restriction list.

“It is often a long haul, but together with other investors we often manage to induce companies to take the green option. There are companies, however, that do not make the necessary change, and in that case we see no alternative but to sell off our investment in the company. Over the past few months, for example, we have had in-depth discussions with Exxon, which has been involved in a number of cases where it turned out that the company has been working against the green transition. Exxon did not want to engage in a sufficiently constructive dialogue in order to remedy the situation, and we consequently saw no alternative but to exclude the company,” says Quinn Liu and continues:

“It is not satisfactory when our dialogues do not lead to change, and it is not an easy decision to exclude a company. But in this case, active ownership was not enough, and our patience had come to an end. Earlier in 2021, we were actively involved in voting three climate-conscious candidates on to the board of directors, and we hope these board members can contribute to making Exxon take green steps and work in accordance with their public announcements in the climate area. Therefore, we will continue to follow the company closely.”

See the full list of excluded companies here.

Examples of excluded companies 2021

 

Want to support the journey from black to green

The fact that companies go from black to green energy is a key element in the green transition, and we want to give our full backing to that change, says Quinn Liu. We can therefore continue to invest in companies with revenue of more than 5 percent from coal if they have a credible climate plan and take concrete steps to phase out their coal activities. The plan must comply with the phasing-out requirements of the Paris Agreement.

“The path to a climate-friendly society is achieved not only by excluding companies that have a negative impact on the climate. It is at least as important that we take responsibility and help induce companies to cut carbon emissions because this makes a crucial difference to the green transition. We use the “Transition Pathway Initiative” climate tool to objectively assess which companies have the will to move forward. We can specifically make a targeted effort to support these companies in delivering on their plans to shift away from coal and, for example, increase the production of renewable energy,” says Quinn Liu.

What is the Transition Pathway Initiative?

 

We can choose to invest in companies with revenue of more than 5 percent from coal if, as a minimum, they qualify for Level 3 of the “Transition Pathway Initiative” climate tool. This means, for example, that the company must have qualitative targets for reducing its carbon emissions, report on its scope 3 carbon emissions (indirect emissions) and be transparent about its lobbying activities within the climate agenda. Learn more about the levels of the Transition Pathway Initiative here.

A lot can happen in a year. Does your pension scheme fit your current life situation?