Danish Pension Fund Excludes Oil

    Stockholm (NordSIP) – MP Pension, a Danish cooperative pension fund covering academics, psychologists and architects, announced it would divest from ten of the world’s largest oil companies.

    The divestment covers equity holdings worth €86 million in ExxonMobil, BP, Chevron, PetroChina, Rosneft, Royal Dutch Shell, Sinopec, Total, Petrobras and Equinor and follows a similar blacklisting of coal and tar sands in 2018. The headline figure only covers equity holdings but MP Pension members at its Spring 2019 meeting called upon the Board of Directors to also divest from corporate bonds issued by fossil fuel companies. Of the ten companies, MP Pension own € 22.5 million in Rosneft and Petrobras bonds.

    The exclusion of these ten companies is the opening salvo of a complete review of MP Pension’s equity holdings in oil companies. “We will assess more than 1000 companies before the end of 2020.” The focus on these ten companies was motivated by the fact that they represent two-thirds of MP’s equity investments in oil.

    The decision is based on MP’s assessment that the companies’ long-term business models are incompatible with the goals of the Paris Agreement to limit global warming to well below 2 degrees. “MP’s ambition is to be recognized as the most responsible pension fund in Denmark and we wish to contribute to the green transition,” commented Anders Schelde, Chief Investment Officer at MP Pension.

    However, the decision was also informed by a concern about stranded assets. “We have based our divestment decision on an assessment of future investment returns of the sector. We do not find that this sector can deliver a return on par with the rest of the market in the coming years. The demand for fossil fuels, including oil, will decrease as the green transition accelerates.”

    After collecting information on the transition plans of the ten companies, MP found that BP, Royal Dutch Shell, Total and Equinor have looked at possible future climate scenarios and are taking steps towards transitioning towards a low-carbon economy. However, ExxonMobil, Chevron, PetroChina, Rosneft, Sinopec and Petrobras have no or very limited initiatives to support the transition to a low-carbon economy. The companies continue to oppose climate regulation, despite publicly expressed support for the Paris Agreement.

    “Based on the data available, it is MP’s assessment that the ten companies are not compatible with the goals of the Paris Agreement – and will not be so by the end of 2020. We have considered whether we should wait to sell our shares until 2020, as a positive turn of events and stronger commitments might still emerge. However, we have decided to draw a line in the sand, as we do not believe that we as investors can further influence these companies before the end of 2020”, says Anders Schelde.

    Image by skeeze from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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