Stockholm (NordSIP) – Länsförsäkringar updated its climate transition and exclusions lists to upgrade Fortum and OCI from their climate transition list and to exclude eleven new companies, including Saudi Aramco.
Climate Transition List Update
The climate transition list was created during the third quarter of 2019. The starting point for inclusion in Länsförsäkringar’s climate transition list is a maximum of 5-20% of revenues from thermal coal power generation. Companies included in this list are part of Länsförsäkringar’s investment universe. However, this does not automatically mean that investments will happen.
Fortum and OCI were removed from the climate transition list following the assessment by Länsförsäkringar’s ESG data providers that each of the two companies now has less than 5% of their revenues coming from coal power generation. For comparison, the previous estimate during the summer of 2019 estimated both companies’ revenues from coal to make up between 5% to 20% of the total. The Transition Pathway Initiative (TPI) considers that Fortum is operating within or below a 2-degrees scenario. On the other hand, OCI’s revenue share from renewable energy is estimated to exceed the revenue share from fossil fuel power generation.
Of the companies still in the process of performing their climate transition adjustment, Drax Group announced a commitment to become carbon negative by 2030. Enel SpA, which issued the first SDG bonds in the autumn, also announced its intention to increase investments more in solar parks.
Asides from the Drax and Enel, the climate transition list also includes the China Longyuan Power Group Corporation, Dominion Energy, Enel Generacion China, Energias de Portugal, ENGIE Brasil Energia, Entergy Corp, RusHydro and IDACORP.
Exclusion List Update
Of the eleven companies that were added to Länsförsäkringar’s exclusion list, Saudi Aramco and PetroChina feature most prominently.
Saudi Aramco was added to the list following its IPO. The company is excluded for three reasons. It owns significant oil reserves, which it extracts contributing to climate change. From a governance or engagement perspective, we are told that “the prospects for meaningful active ownership are deemed to be challenging.” Finally, the company is one of the main revenue sources of the government of Saudi Arabia, which is involved in human right abuses. Aramco was included in MSCI ACWI (together with other Saudi stocks) during the second half of 2019.
PetroChina is blacklisted due to its climate impact, high ESG risks and because it is involved in violations linked to human rights linked to activities in Myanmar, Sudan and Syria. Having failed to address these risks sufficiently or respond to requests in a satisfying manner, they also did not respond to proposals from Länsförsäkringar’s appointed engagement service provider to establish a dialogue. As a result, the possibility of a meaningful dialogue is considered to be low at the moment.
Länsförsäkringar also added nine other companies at the end of Q4 for involvement in thermal coal: Cleco Corporate Holdings LLC, CITIC Resources Holdings Limited, NRG Energy, Jilin Yatai (Group), Hidili Industry International Development Limited, RWE Aktiengesellschaft, Canadian Utilities Limited, Vedanta Resources Limited and First Pacific Company Limited. The exclusion list now counts approximately 250 companies.
Image © NordSIP