The Danish pension fund P+ will now cease to invest in oil, gas, and coal companies planning to invest in new oil and gas fields or new coal power plants. That is the decision taken at the pension funds AGM that took place on April 3, 2024.
At the AGM, a majority of the members (78%) supported a resolution filed by its members, but also supported by the board. The resolution asks the pension fund to update its investment policy for investments in the fossil fuel sector, in order to make it compatible with the Paris Agreement. With this decision, P+ becomes one of the Danish pension funds with the most restrictive policy for investments in the fossil fuel sector.
IEA fossil fuel expansion threshold gaining support as the guiding principle for Paris-aligned investments in fossil fuel companies
Since the launch of IEAs Net Zero by 2050 scenario in 2021, clearly outlining that a full stop for any new fossil fuel projects would be a key requirement to fully align with the Paris agreement, Danish pension funds have struggled to decide whether the IEA guidance should be incorporated into their investment principles. But more and more pension funds are incorporating the “non-expansion” threshold into their investment policy guidelines.
With P+´s adoption of the guiding principle of “no funding of new fossil projects”, the pension fund will position itself alongside other pension funds such as AkademikerPension, AP Pension, and Lægernes Pension, all of which have implemented similar IEA-aligned policies to stop investments in oil and gas companies with expansion plans.
The tabled resolution at P+ also encompasses a more stringent policy to stop investments in companies expanding with new coal power plants, which also places P+ at the same ambition level as AkademikerPension and AP Pension in terms of having policies in place, restricting investments in companies planning new coal power plants or new coal mines.
Economists and engineers provides guidance for responsible investing
The P+ pension fund, with a membership base mainly consisting of economists, lawyers and engineers, is now consolidating how responsible pension funds should align their climate ambitions with clear guiding principles for investments in the energy sector. It is noteworthy that a pension fund with members having a solid understanding of both financial and technological aspects of the global green transformation no longer see continued investments in fossil companies as the responsible choice, and neither as a necessity for the energy transition nor for long term profitability.
P+’s decision signifies an acknowledgment that green transformation can be implemented without continuing the support of the traditional fossil fuel companies. And it may also turn out to be a wise choice financially, as recent estimates from the International Energy Agency (IEA), has warned that up to 60% of the value in the oil and gas sector could become worthless in a Paris-aligned transition scenario.
With its new policy, P+ positions itself proactively by safeguarding its investments against potential significant value losses in a time when a rapid sustainable transition is both critical and increasingly taking form. Thus, P+ is not only in the process of changing its own course but it also sends a strong signal to other financial institutions and worker groups that it is possible to navigate towards greener waters without compromising financial returns.
Supportive quotes
Brian Vad Mathiesen, Professor, Engineering Science
“Climate scientists point out the risks of not stopping greenhouse gas emissions. Industries and utilities, backed by some governments, still initiate new oil & gas extraction projects and construct new coal-fired power plants. Climate scientists have repeatedly highlighted that we cannot open new extraction and expand the use of fossil fuels. From my research perspective regarding the transition to green energy, I can confirm that there is no need for new sources of fossil fuels. On the contrary, with the technology currently available, it is feasible to shut down several existing fields. It simply requires the roll out of known technology on energy efficiency, renewable energy, electrification of industry and transport as well as district heating and power2X”
Mikael Skou Andersen, Economist, Professor, Environmental Science
“I believe this is a wise and timely decision. The bell tolls over new investment in coal, gas and oil, as yet another reputable pension fund is on course for additional fossil fuel divestment of its €20 billion assets. If P+ continues in this direction, P+ should soon be able to qualify for the attractive Nordic Council of Ministers’ swan ecolabel for sustainable investment funds, awarded only to financial products where the Paris Agreement is fully respected. The Swan label will however rule out pension funds from holding US federal bonds, should a possible new Trump administration decide to withdraw from the Paris Agreement”
Peter Birch Sørensen, Economist, Professor, Ecological Economy
“We know that the world must transition away from fossil fuels and that it is extremely urgent. Therefore, we fail in our responsibility towards future generations if we invest our pension savings in continued expansion with fossil energy.”
Details about P+:
The Pension fund P+ handles pension savings for 110.000 economists, lawyers and engineers, with a total AUM of approx. 20 billion Euro (150 Mia DKK).
Votes cast:
For: 1355 (78.2%)
Against: 335 (19.3%)
Blank: 42 (2.4%)
Resolution text:
“The AGM calls on the Board of Directors to update the pension fund’s sustainability policy and divestment criteria for the fossil fuel sector by the end of 2024, so that the pension fund divests from oil, gas and coal companies whose business model is not compatible with the Paris Agreement. In this context, investments in new oil and gas fields or new coal-fired power plants are not considered compatible with the Paris Agreement. The updated divestment criteria should be followed unless there is a reasonable justification, cf. the comply or explain principle”.
Link to full resolution text:
Resolution to divest from upstream fossil fuel companies with expansion plans
Filed at Pension fund P+ AGM, April 3, 2024 (ENGLISH)
List of upstream oil/gas companies on the current P+ asset list, which are expected to be divested as a result of the new policy:
Banco BTG Pactual SA, Comstock Resources Inc, Delek Group Ltd, GS Holdings Corp, JSC NC KazMunayGas (KMG), Mineral Resources Ltd, Osaka Gas Co Ltd (Daigas Group), PT Pertamina (Persero), Schlumberger Ltd, GAIL (India) Ltd, Indian Oil Corporation Ltd, KunLun Energy Company Ltd, MOL NyRt, Petroliam Nasional Bhd (Petronas), The Williams Companies Inc, Tokyo Gas Co Ltd.
Total investments constitute around 300 Mio DKK (40 Mio Euro).