Denmark’s pension scheme for academics is stepping up its drive to encourage a global transition to cleaner energy by taking a more activist approach to companies that heavily use or finance such assets.
Asia – as the biggest consumer of coal, the most polluting fossil fuel – is in its sights. And AkademikerPension is pressuring companies like Japanese bank Mizuho and the construction arm of Korean group Samsung to do the right thing when it comes to the environment.
The region is also central to the fund’s plans to double its 6% allocation to climate-related assets by investing more into renewable energy projects there.
The DKr135 billion ($21.83 billion) plan has been a big proponent of sustainable investing for decades but has further accelerated its thinking in this area. AkademikerPension has already divested many of its listed fossil fuel-related assets globally, having decided to do so two-and-a-half years ago.
“We've been selling off investments in coal miners, oil and gas companies, tar sands producers and so on,” chief investment officer Anders Schelde told AsianInvestor.
DUMPING ENERGY MAJORS
In 2017 the fund owned shares in seven of the 10 biggest global energy majors, such as BP, Chevron, Exxon and Shell. It has now sold most of them – around $200 million in stock – and holds just two: Italy’s Eni and Spain’s Repsol.
Those investments are still being reviewed, but the two companies may have made enough of an effort to align themselves with the aims of the Paris Agreement to remain in the portfolio. The agreement’s central aim is to keep a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and ideally no higher than 1.5 degrees Celsius.
“So far we have only found two oil majors that we think are probably aligned sufficiently, so they are the only ones we haven't thrown out or made a final verdict on,” he said. “And we might conclude that they are okay from a Paris perspective.”
AkademikerPension is now focused on strengthening its divestment of companies related to coal production and generation, Schelde said. “And at the same time, we’re looking at what we can do as a responsible investor to push for faster and better transition from coal.”
Asia is key to that strategy. China and India generate some 67% and 75%, respectively, of their power from coal, according to the International Energy Agency.
PUSHING AGAINST COAL
“We identified active ownership as something that we will spend more time on, particularly on coal and with more of an Asian focus,” Schelde said.
“Obviously we can’t do that so easily with companies we’ve divested. If we can't go after coal producers, then we go after the next in line – those who buy the coal or build and finance the coal-fired power plants.”
Hence it is engaging as a shareholder with the likes of Samsung Construction & Trading, which builds coal-fired plants, and Japanese bank Mizuho, which helps finance such projects. The fund holds DKr438 million in Samsung Group companies via four positions and DKr20million investment in Mizuho.)
The two groups are also involved in renewable energy projects, noted Schelde, “so we think they should focus on those instead”.
AkademikerPension is not alone in its opposition to the involvement of the Korean and Japanese companies in coal projects, notably Vung Ang 2 in Vietnam. The planned plant has drawn international criticism over the human rights and environmental issues it raises.
The project is also seen as being against the spirit of commitments by the Japanese banks involved – which also include Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group – to stop overseas coal finance.
UK firm Legal & General Investment Management, Norway’s KLP Kapitalforvaltning and Helsinki-based Nordea Bank have all warned Samsung this year over the Korean firm's electronics stores in various cities.
Samsung executives have subsequently since admitted that involvement in the project has damaged the company’s brand and that it would not get involved in building more coal-fired plants. Majority state-owned Korea Electric Power Corp (Kepco), which has a share in Vung Ang 2, has done the same.
“There’s an encouraging statement from Samsung and Kepco that says they are withdrawing from these types of activities which, of course, we're very happy about,” said Schelde.
Subsequently, in mid-November Samsung’s insurance arm announced it would halt its involvement in coal power, by both divesting such investments and ceasing to insure new coal projects. And a growing number of other firms are doing the same.
* An extended interview with Anders Schelde will appear in the forthcoming Winter 2020 edition of AsianInvestor magazine.