Even though 2050 are almost three decades away, decisive action is required already today and Alliance Members have to set a range of interim targets for their engagement efforts and investment strategies by 2025 that can produce the required change well before this decade has ended.
As a member of the Net-Zero Asset Owner Alliance, PensionDanmark has in our capacity as investor, endorsed working towards a world economy with Net Zero Green House Gas emissions by 2050 in order to limit the global rise in temperature to 1.5°C. Measures to achieve this include active ownership and investments in climate-friendly technology.
In 2020, we sat interim targets on the way to fulfill our net-zero commitment; targets that require change well before the decade has ended. These interim targets based on the Target Setting Protocol implies a maximum 1.5 °C warming above pre-industrial levels – the most ambitious target defined in the 2015 Paris Agreement.
The interim targets include:
- Sector targets: By the end of 2024, we aim to reduce our climate footprint within four main sectors: Oil and Gas by 20%, Utilities by 35%, Cement by 10% and Shipping by 15%. The sector targets are developed with input from the OECM model on sector pathways.
PensionDanmark has two overall climate goals: First, to have a well-diversified investment portfolio that produces satisfactory returns for our members with the lowest possible carbon footprint. Secondly, to invest in companies and projects that both fulfil our return expectations and produce solutions to global climate challenges. Due to these goals, we have chosen to focus on sectors with a substantial negative climate footprint and invest in the most visionary and progressive companies within these sectors. These companies face demands for a green transition, but the global economy depends on their production, therefor the best solution for the climate is to promote and invest in the companies that lead the green transition.
- Engagement targets: PensionDanmark has set engagement targets that includes supporting collaborative and single engagements, backing SBTi approved targets and net-zero commitment in the companies in which we invest and assisting consultation papers aimed to make a real world change. For instance, PensionDanmark has committed to execute 20 engagements contributing to net-zero before 2025 as well as engaging in minimum 5 climate change policies and practices with Asset Managers and contribute to minimum 5 AOA-papers.
The Alliance is committed to driving real world impact, primarily through engagement with corporates and policymakers. PensionDanmark engage in dialogue with authorities and other stakeholders regarding societal issues, particularly how private investors can become involved in finding new and innovative ways to solve them. Not only does this expand PensionDanmark’s investment opportunities, but it also adds to solving societal tasks and challenges.
- Ownership of green infrastructure: By 2025, PensionDanmark aim to own 1,300 MW of green power capacity – an increase of 200 MW over 5 years.
PensionDanmark has been invested in green infrastructure for the past ten years and currently has investments in wind, biomass and solar cells worth DKK 15.3 billion – equivalent to some 1,100 MW of green power capacity. Renewable energy investments are an important contributor to robust and stable pension savings for our members. At the same time, these investments effectively contribute to overcoming climate challenges, as a higher proportion of renewable energy will help replace other energy sources, such as coal, in the global energy mix. The derived CO2 savings for 2020 amount to just below 1.9 million tonnes. PensionDanmark is furthermore inclined to participate in minimum three roundtables with DFI´s to enhance blended finance of climate solutions in the Least Developed Countries.
- Sub-portfolio targets: By the end of 2024, the climate footprint of our portfolios, listed equities, corporate bonds and real estate, are to be reduced by 20% compared to 2019. The carbon footprint of PensionDanmark’s total investments in these asset classes was reduced by 15% from 59.9 tonnes/EURm in 2019 to 51.0 tonnes/EURm in 2020.
The Alliance has decided that its members should aim for a reduction of 16-29% in the climate footprint of their portfolios between 2019 and 2024. As our investments already have a relatively limited climate footprint, some 60% of MSCI ACWI, we have set a target at the lower end of this range. A more aggressive reduction target might require us to dispose of investments in forward-thinking companies in the most fossil-intensive sectors and preclude us from exercising constructive dialogues, active ownership and supporting progressive climate-related proposals at the companies’ general meetings.