Stockholm (NordSIP) – AP7, one of the Sweden’s public pension system’s buffer funds announced the expansion of its blacklists to encompass a total of 93 companies, following the addition of seven new names.
To better understand AP7’s approach to exclusions, NordSIP reached out to Charlotta Dawidowski Sydstrand (Pictured), Sustainability Strategist at AP7. “Our blacklisting of companies that are acting in conflict with norms such as the Paris Agreement is first and foremost a tool for active ownership alongside our voting at AGMs and other engagement with companies. The only goal for divesting and publicly black listing, is to make the company change their course of action in a more responsible direction. This is quite different from a blanket divestment or exclusions policy when the goal is, as you put it, to sterilize a portfolio of unwanted companies, and investors quietly sell their holdings,” Sydstrand explains.
The 7 New Exclusions
Of the seven new blacklisted companies, five of these are blacklisted due to the Paris Agreement, including China Power International Development Ltd, China Shenhua Energy Company Ltd, Huadian Power International Corp Ltd, Shanxi Lu’An Environmental Energy Development Co Ltd and TBEA Co Ltd.
The other two companies that are now blacklisted are Wärtsilä Oyj Abp for involvement in the production of components for nuclear weapons and Ratch Group Public Co. Ltd. based on inadequate human rights management and compensation in connection with a collapsed hydropower plant in Laos.
Since December 2020, AP7 has blacklisted companies with a large absolute climate impact in coal production and coal power that have expansion plans for their fossil fuel operations based on research showing that decommissioning coal as an energy source is the single most important measure to curb climate change. In 2021, AP7 further developed a method based on the fact that they are judged to counteract the two-degree goal in the Paris Agreement through large-scale coal operations with expansive plans.
“We first included the Paris Agreement in our black listing in 2016, we developed the analysis in 2020 which resulted in the exclusion of a number of companies with large production of thermal coal and/or coal power and of those that also kept expanding their coal production. These 5 Chinese coal companies we black listed yesterday are all involved in large scale coal mining and/or coal power production as well as using their capex to expand their coal operations. Thus, we have concluded that this is incompatible with the goal to keep global warming well below 2 degrees and thus in conflict with the Paris Agreement. We will continue to engage with the companies after our public blacklisting in order to persuade them to take action to transition their operations,” Sydstrand argues.
The Path Ahead
“We engage with all companies before and after the black listing. It starts by us flagging the blacklisting to the company as soon as we have concluded that it is acting in conflict with the Paris agreement. We are clear in our dialogue with the company what actions it needs to take in order for us to revise our decision and for the company to avoid being blacklisted. The company then have a number of months to start to take action and report back. If the company has not fulfilled our revision criteria it will be publicly black listed. After the blacklisting, we continue the dialogue with the company, reminding them of our revision criteria and if they take credible action they will be removed from our black list and we will invest in them again,” Sydstrand says.
“Given the brief time frame is left to curb emissions, my hope is that investors focus their efforts and energy on real-world effects rather than actions that only has effects on their portfolios. Research shows that less than 100 companies are responsible for over two-thirds of the world global emissions. If sustainable investors used their ownership and their voting power to target the highest emitting companies, we can come a long way. My hope for sustainable investments going forward is therefore to see more forceful stewardship and engagement from the investment community,” Sydstrand concludes.