AnsvarligFremtid (Responsible Future) current proposal for a definition of Paris compatibility for investments and transparency
The following 8 criteria summarize AnsvarligFremtid´s proposal for defining Paris-compatible pension fund products as of April 2022. The criteria will undergo continuous adaptation as new knowledge emerges about the scientific basis for climate change, as well as new technical information on investments and company specific data become available.
1) The carbon footprint of the pension product can serve as an overarching metric to evaluate whether the pension product is overall on track to meet the requirements for Paris compatibility in order to meet the target of maximum global warming of 1.5 degrees. Paris compatibility requires the pension product to achieve a reduction in the portfolio’s carbon footprint (including scopes 1,2 and 3) corresponding to at least a 25% reduction by 2025, 50% by 2030 (compared to 2019) and to meet Net-Zero by 2050 .
However, a significant reduction in the carbon footprint of the pension product is not in itself sufficient to ensure Paris compatibility. In order to meet the requirements for Paris compatibility, the following criteria should also be met:
2) The pension product should not include investments (both shares, bonds and other types of investments) in companies that oppose the Paris Agreement, e.g. by lobbying and spreading misinformation. Here the criteria from InfluenceMap  or from Climate Action 100+ Net Zero Benchmark can be used .
3) The pension product should not include investments in fossil fuel companies that do not comply with important and reasonable requirements, including the Paris-aligned IEA Net Zero by 2050 scenario implying “no new investments in fossil energy after the year 2021“, thus including investments in coal. Here the criteria from the Global Coal Exit list for coal should be applied , just as the Coal Policy Tool criteria should be applied .
4) The pension product should not include investments in fossil fuel companies that do not comply with important and reasonable requirements, including the Paris-aligned IEA Net Zero by 2050 scenario implying “no new investments in fossil energy after the year 2021“, including investments in oil and gas companies. Here the criteria from the Global Oil and Gas Exit list for oil and gas should be applied , just as the criteria in Oil and Gas Policy Tracker should be applied .
5) The pension product should not include investments in companies that do not meet industry-specific climate change requirements. This should be based on the Climate Action 100+ Net Zero Benchmark 
6) The pension product should not include investments in government bonds issued by countries that oppose the Paris Agreement, e.g. by lobbying against climate policies in multilateral negotiations (e.g. COP meetings) and/or by enacting inadequate climate policies within their own jurisdiction. Here the criteria from the ASCOR project may be used when these criteria are developed .
7) The pension product must meet high requirements for the share of green investments in the portfolio, measured in accordance with the EU’s Green Taxonomy. The starting point should probably be that green taxonomy-compliant investments should constitute at least 20% of total investments across all types of investments by 2030, but a more credible assessment of a specific target is likely to be set once the scientific data base has significantly improved .
8) The pension product should adhere to the following minimum requirements for the performance of active ownership and level of transparency :
a) The pension provider shall join international investor coalitions which jointly commit themselves to set Paris-compliant targets for their climate investments and for their active ownership. The most relevant coalitions are likely the Climate Action 100+, Net Zero Asset Owner Alliance and IIGCC’s Paris Aligned Investment Initiative. Only by exercising active ownership as part of large coalitions we can expect to enable a sufficient pressure to influence large companies to align their business plan with the Paris agreement.
b) The pension provider shall establish clear Paris-compatible policies for its active ownership, including for voting on climate proposals at company AGMs. For general meetings of energy companies, a Paris-compliant voting policy should specify that the pension company will support shareholder-filed resolutions requesting Paris-adapted business models, but that it will not vote for a company’s own presented business plan if it does not pursue a full halt to the establishment of new fossil extraction projects, as the IEA has recommended in their latest Net Zero by 2050 scenario. Similar Paris-compliant requirements should also be defined for banks and particularly polluting sectors such as aviation, cement, steel, shipping, land transport, agriculture etc.
c) The pension provider shall establish policies for stepping up active ownership. As an example, the pension company must make clear expectations of the companies and make it clear that if these expectations are not met by a clearly stated date, then the pension provider will divest their assets in the company across its equity and bond portfolios. Such a policy must also make it clear when the pension provider itself or in collaboration with other investors will file shareholder proposals at the company’s AGM. Such policies should be established across sectors, including energy companies, banks and other particularly polluting industries.
d) The pension provider shall ensure a sufficient degree of transparency, both in terms of asset list disclosure, selection of asset managers and proxy advisors based on Paris-aligned criteria and use of benchmarks. Transparency must also cover the performance of active ownership, in particular around voting at AGMs in order to demonstrate the result of active ownership. The pension provider shall publish its voting in an easily accessible and timely manner on the pension providers website, as recommended by the net zero asset owner alliance investor network.
References and notes:
 The Net Zero Asset Owner Alliance recommends an overall CO2 reduction of between -16% to -29% by 2025 using 2019 as baseline.
 InfluenceMap has during a number of years assessed a wide range of companies in relation to their lobbying activities, including memberships of interest groups that oppose the Paris Agreement.
 Climate Action 100+ launched its first edition of Net Zero Company Benchmark in March 2021, a tool that scores the world’s 160 most CO2-emitting companies in relation to their degree of Paris compatibility. Link: https://www.climateaction100.org/progress/net-zero-company-benchmark/
 The Global Coal Exit List provides a full overview of all coal companies in the world that have a business model that is incompatible with the goals of the Paris Agreement. Link: https://coalexit.org/
 The pension product should not include investments in companies that have a large part of their turnover from coal. Here the Coal Policy Tool criteria be used. Link: https://coalpolicytool.org/
 The Global Oil and Gas Exit List (GOGEL) provides a full overview of all oil and gas companies in the world that have a business model incompatible with the goals of the Paris Agreement. Link: https://gogel.org
 The pension product should not include investments in companies, regions or countries that have a large part of their turnover from oil or fossil gas. The Oil and Gas Policy Tracker can be used to identify such companies. Link: https://oilgaspolicytracker.org/
 Some of the world’s largest fossil companies are wholly or partly owned by national states (e.g. Equinor). Therefore, there is a need for investors to also include the climate policies of individual countries as a tool to assess the Paris compatibility of investments in government bonds. In the expectation that information about which countries that have a climate policy that is incompatible with the Paris Agreement will soon become available (e.g., via the ASCOR initiative), then such a tool should be used by investors to establish a Paris-compatible investment strategy. Link: https://www.unepfi.org/news/industries/investment/investors-to-develop-new-tool-to-assess-sovereign-climate-change-governance-and-performance/
 The pension product must meet sufficiently high requirements for the share of green investments in the portfolio, measured in relation to the EU’s Green Taxonomy. As the actual implementation of the Green Taxonomy has not yet entered into force, it is still too early to establish reliable number for the necessary level of green investments before a better data base is provided. Link: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
 AnsvarligFremtid has formulated a set of requirements for the pension companies’ policy for an active ownership strategy supporting the Paris Agreement. Link: https://www.ansvarligfremtid.dk/rapportpensionsurvey2021/