Danish fund to track CO2, may exclude some firms from portfolio

COPENHAGEN (Reuters) - Denmark’s biggest commercial pension fund will soon track carbon emissions by companies it invests in, and exclude those it finds breach the Paris climate accord, its CFO told Reuters.

PFA, which provides pensions for 1.2 million Danes and has assets of $95 billion, is the latest investor to push the issue of climate change up its agenda.

Sweden’s largest national pension fund, AP7, sold its holdings in six firms it said violated the Paris agreement in June, while Norway’s sovereign wealth fund is asking the banks it has invested in to disclose how their lending contributes to greenhouse gas emissions.

Last year PFA added an obligation to its policy for responsible investments that it should not invest in companies which obstruct the Paris agreement.

The pension fund has hired Swedish consultancy firm GES to help it develop a method to screen the hundreds of companies it has investments in its $16 billion stock portfolio.

“In the last 12 months we have made a big effort to find out the data and the method to measure the carbon emissions in our stock portfolio,” Anders Damgaard told Reuters.

“I hope we’ll be done this year.”

Damgaard also said the fund was also reviewing whether it could match the returns from the four sectors which contribute more than 80 percent of the carbon emissions in its portfolio from alternative investments.

Energy, industrials, utilities and materials are responsible for the bulk of its emissions at present.

“We have to consider whether we could get the yield we get from those sectors from companies in other sectors instead,” Damgaard said.

While the Paris climate deal is an agreement between nations, some investors have used it as a tool to pressure the companies they invest in to lower their emissions.

So far the Danish fund has not excluded any companies for not complying, but that will likely change once the pension fund has worked out a system, Damgaard said.

“I believe that will come, but we have to set up a process and some clear criteria for how to identify those companies. And that work is still ongoing,” he said.

He said the new tool should also be used to identify which sectors to invest in in order to keep carbon emissions within PFA’s “fair share”.

($1 = 6.3927 Danish crowns)

Editing by Gwladys Fouche and Alexander Smith