A new survey from ResponsibleFuture (AnsvarligFremtid) shows that Danish companies are hesitant to prioritize the climate when choosing a pension scheme for their employees. The survey thus shows that companies prefer to leave it up to the individual employee to opt for more climate-friendly investments instead of the company demanding climate-responsible investments for all employees. Thus, there are no companies that set specific documentation requirements for the offered pension products to support the Paris climate agreement.
Furthermore, the survey shows that only a few companies have included the choice of pension plan in the company’s sustainability strategy. Overall, the report’s concludes, that if the current lack of prioritization of climate in the choice of pension scheme continues, then as a consequence, Denmark will not live up to its commitments under the Paris climate agreement.
With its signature to the UN climate agreement in 2015, Denmark has committed to ensuring that the public and private cash flows support the goals of the Paris Agreement. As long-term investors, and with a total management of approximately DKK 4600 billion, Danish pension funds have a great responsibility to meet Denmark’s obligations under the Paris Agreement.
Danish companies like Novo Nordisk, Orsted, Lego and Vestas that subscribe to pension plans for their employees have a responsibility to demand Paris-compliant pension plans from their pension provider. In addition, green companies that “win on the green transition” have an interest that Danish corporate pension schemes, currently containing assets of around DKK 1600 billion, support the company’s own mission, and therefore in ensuring that the pension products offered to their employees are Paris-compatible.
The purpose of the survey has been to shed light on how far 24 of the largest and most sustainable Danish companies have come in relation to integrating employees’ pension schemes into the companies’ sustainability strategy, and how they are prioritizing sustainability when choosing a pension scheme, thus ensuring that employees are offered a pension product that supports the Paris Agreement.
Illustration: List of 24 Danish companies invited to participate in the survey
Results of the survey
The survey resulted in adequate responses from 9 companies (COOP, JYSK, Grundfos, Pandora, Orsted, VKR, ISS, COWI & Vestas), while the other 15 companies (A.P. Møller Mærsk, Novo Nordisk, DSV Panalpina, Danfoss, Rockwool, Siemens Gamesa, Carlsberg, Lego, Arla Foods, Salling Group, Danish Crown, IKEA, Novozymes, Chr. Hansen og Bestseller) surveyed did not want to participate.
The main conclusions of the report
1) Choice of pension scheme is rarely integrated into companies’ sustainability strategy
Only 1 (Orsted) out of 9 companies state that the choice of pension scheme is contained in the company´s sustainability strategy.
=> This has the clear consequence that companies do not get to prioritize to analyze the quality of pension plans and, ultimately, that Denmark will not live up to its commitment to ensuring that public and private cash flows support the objectives of the Paris Agreement.
2) Focus on sustainability in pension schemes is limited to voluntary opt-in
About half of the companies state that sustainability and climate are important considerations, but instead of requiring climate-responsible investments for all employees, companies place the most emphasis on the individual employee having the opportunity to opt for a special green/sustainable pension product (e.g. PFA KlimaPlus).
=> When companies leave it up to the individual “to opt for sustainability”, as a consequence this will imply that a large part of the investments will continue to go be invested in coal, oil and gas companies, which continue to lobby against green transition and which continue to expand with new risky fossil projects, both in violation of the objectives of the Paris Agreement.
3) Total absence of general and specific expectation requirements for Paris compatibility in investments
Only one of the companies surveyed (Orsted) states that they have expressed a general expectation that the pension products offered support the climate goals of the Paris Agreement. Yet, none of the companies have put forward specific requirements to ensure that the pension product is Paris-compliant.
=> When companies do not require pension products to support the Paris Agreement, it will leave it to the pension funds to decide whether and how the pension products offered will support the goals of the Paris Agreement. This lack of a requirement from the companies means that the largest Danish pension providers do not yet offer “Paris-compatible” pension products as their basic product, and that overall, the Danish pension savings overall are therefore not invested in a way that supports the Paris Agreement.
The report contains a number of recommendations for Danish companies:
1. Include the choice of pension plan in the company’s sustainability strategy.
2. Offer all employees per default a pension plan in line with the Paris Agreement and remove business from pension providers which cannot offer that.
3. Require the pension provider to provide ongoing transparency to beneficiaries on how they are implementing their Paris-compatible investment strategy, including on the management of shareholder engagement, portfolio decarbonisation and investment exclusions.
4. Conduct surveys of beneficiaries´s expectations for responsible investments and prioritize participating in dialogue meetings with the pension provider to ensure a continuous focus on the pension provider’s products to ensure that they support the Paris Agreement.
The report can be downloaded here: LINK