Danish Pension Funds’ Fossil Fuel Dilemma

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    Stockholm (NordSIP) – A recently published paper by ActionAid Denmark (Mellemfolkeligt Samvirke) has reignited the debate over Danish pension funds’ investments in fossil fuel companies. The report reveals that despite showcasing robust and proactive sustainability strategies and positioning themselves as responsible investors, many of the Nordic country’s pension funds still finance coal and new oil and gas projects. Ultimately, the funds are grappling with the enduring dilemma of whether to divest from or engage with the fossil fuel sector.

    The bleak facts

    According to the report, the sixteen biggest Danish pension funds have invested as much as DKK 25 billion (about €3.35 billion) in the stocks and bonds of the ‘dirtiest’ companies out there, i.e., those involved in coal or new oil and gas fields1. To help put this amount into perspective, ActionAid compares it to the meagre DKK 1 billion (about €130 million) the Danish government has allocated to the green transition in its 2024 budget.

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    Despite climate scientists’ urgent appeal that coal use must be phased out as soon as possible, Danish pension funds have invested DKK 8.3 billion in coal companies, including DKK 2.9 billion in those developing new projects such as mines or coal-fired power plants. For instance, eight of the funds scrutinised by ActionAid invest in Japanese Mitsubishi, which is building a controversial coal-fired power plant in Vietnam, Vung Áng 2, expected to emit 2.8 million tonnes of CO2 per year.

    Furthermore, almost DKK 18.5 billion of Danish pension money backs companies establishing new oil and gas fields, contrary to the warnings of climate science. The funds are financing, among others, one of the world’s largest new fossil fuel projects, planning to extract two oil fields in Uganda and build the world’s longest heated oil pipeline to transport the oil to the Tanzanian coast. The fossil fuel project faces severe opposition from climate, environmental and human rights activists.

    Diverging strategies

    Not all Danish pension funds are equally responsible for financing fossil fuels, however. The dispersion between the sixteen funds examined by ActionAid is quite striking. While PFA and Danica, the two institutions that top the list of investors in the ‘dirtiest’ companies, together account for 42%, AP Pension and AkademikerPension stand for only 1.3%. What it boils down to is diverging climate strategies.

    In an interview for Danish radio quoted by EkstraBladet, Rasmus Bessing, PFA’s Head of Investment, defends the fund’s investments in fossil fuel companies such as Total Energies and Shell. He explains that they are both deliberate and climate-friendly, as they enable PFA to influence the companies from the inside. “The climate crisis is such a big challenge that we need to tackle it in two ways,” he says (in Danish). “We need to invest heavily in green solutions and renewable energy. But it is also crucial that there are those who push for existing energy companies to transform. That is why we are invested in these companies.”

    Yet not everyone agrees with Bessing. AP Pension, the Danish pension company with the lowest share of investments in fossil fuel companies (0.3%), has chosen a different path. “With our tightened strategy, we have been clear, consistent, and transparent: oil & gas companies that have extraction plans and do not show strong transition signals towards a low-carbon world have no place in our equity and corporate bond portfolio,” says Anna Maria Fibla Møller, Head of Responsible Investments at AP Pension. “As an investor, we need to manage the negative impacts on the climate, but also to protect our customers’ pension savings from climate risks. We have a responsibility as an active owner to push fossil fuel companies in the right direction. But we also must take action if this doesn’t work,” she adds.

    Anders Schelde, CIO and CFO at AkademikerPension, is of the same opinion. “Some pension companies have remained invested in oil, gas and coal on a large scale, arguing that they are staying on the inside to push for change,” he comments in a LinkedIn post. “Well, it’s great if they succeed … But AkademikerPension has thrown in the towel and concluded that it is better to push from the outside. In doing so, we believe we also protect our members’ pensions against the significant long-term return risks in the fossil fuel sector.”

    P+ is another Danish pension fund to switch from engagement to divestment. On 30 October, the company announced that it was bidding farewell to all major oil and gas companies in its portfolio. “Over the past three years, we have been actively engaging with ENI and Repsol and have tried to keep them on track with their emerging green goals,” explains Jasper Riis, Investment Director at P+. “Unfortunately, we must realise that the companies have not made sufficient progress.” Given the long-term horizon of P+’s investments, he is convinced that opting out of companies that do not try to adapt to the broad climate goals is acting in the fund’s best interest.


    The recommendations from ActionAid are unequivocal: Exclude oil and gas companies exploring new oil and gas, building new oil and gas fields, LNG terminals or pipelines or planning to expand their production. Exclude coal companies that build new mines, power plants or other infrastructure, as well as those that derive more than 10% of revenues from or have 10% or more of their production in coal.

    That said, there is a lot that engagement as a strategy can achieve, too, according to the report’s recommendations. It is just a matter of whom to engage with. “Pension funds should prioritise resources to exercise active ownership towards banks,” urges ActionAid. “The pension funds’ efforts should make banks stop lending to fossil fuel companies that are expanding. This will support the effect of the pension funds’ divestment and make it more expensive for fossil fuel companies to secure the capital they need.”

    The pressure is mounting on institutional investors, not just in Denmark but globally, to demonstrate that their commitment to tackling climate change is backed up by action. Frustration over the lack of concrete results delivered by an active ownership approach is not going away anytime soon. It is, perhaps, time for some pension companies to re-examine their strategy and decide which course of action is the most efficient way to create long-term value.

    1Note that upstream oil and gas companies without expansion plans and midstream oil and gas companies are not included in the 25 billion.

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