Investments in infrastructure
PensionDanmark is in dialogue with authorities and other stakeholders regarding societal issues, particularly how private investors can become involved in finding new and innovative solutions to them. Not only does this expand PensionDanmark’s investment opportunities, but it also adds to solving societal tasks and challenges.
Infrastructure investments which benefits society, e.g. by reducing CO2-emissions, can be a challenging task for the public sector to implement by itself. The reason is that the projects often require a long repayment period, and that the public sector often has difficulties in securing the financing. This makes pension funds like PensionDanmark, which can deliver financing while securing attractive returns for their members in the long term, a natural partner for the public sector.
PensionDanmark e.g. invests in wind farms in Denmark and abroad, such as Anholt offshore wind farm and Elevate onshore wind farm in the US. Investments are also in gas pipelines and transmission networks, such as the natural gas pipeline, Noorgastransport in the Netherlands and Dolwin in the German North Sea.
Collectively, PensionDanmark has invested in or undertaken to approx. DKK 23bn (at the end of 2016) to renewable energy infrastructure. PensionDanmark has acquired renewable energy plants (wind, sun, biomass) with a total capacity of 2.500MW in annual green energy.
PensionDanmark’s share of the renewable energy assets equates in terms of capacity to more than the energy consumed by PensionDanmark’s 695.000 members and their families annually.
New Funding Models
In recent years, PensionDanmark has developed several funding models that contribute to solving societal challenges in the areas of climate and energy. For instance, these new funding models can foster private financing for environmentally-friendly projects, which can solve the public challenge of diffusing climate-friendly technology.
One example is the construction of a biomass plant in the UK, where Danish companies are responsible for providing technology, while PensionDanmark supplies financing.
The Danish Climate Investment Fund (DCIF) and the Danish Agribusiness Fund (DAF) to which PensionDanmark has respectively committed DKK 200m are examples of new ways to finance projects.
Both funds exemplify the use of blended finance, where public means contribute to the integration of private means in projects that under normal circumstance would involve a great degree of risk for private investors. The initial investments of DKK 800 and 775m to the funds, DCIF and DAF, are expected to ensure induced investments of approx. 7-9bn for each of the funds.
Unlisted investments, as infrastructure investments often are, are by default non-liquid, and they are not easily divested as listed investments, in case our guidelines for responsible investments are violated. ESG-standards are in effect an integral part of the due diligence process in relation to the acquisition of new alternative investments.
We evaluate our investment partners to estimate if their approach to responsible investments is compatible to our expectations.
In addition, our requirements for responsible investments are included in the investments term of conditions. After the investment has been made, we monitor the investment continuously and receive relevant reports regarding ESG-factors.