Danish pension provider ATP is pledging to stop allocations of capital toward fund managers who have exercised an interest in investments in companies that help push the fossil fuel industry forward, said the pension’s environmental, social, and governance (ESG) chief, Ole Buhl, in a conversation with Reuters.
The institutional investor has approximately $133 billion in assets and is regarded as one of Europe’s largest funds—thus making a strong statement for the sustainable investment movement.
The fund gains roughly half of its exposure to fossil fuel investments through externally managed funds in asset classes such as private equity and private credit.
“Buhl said the risk of some fossil fuel assets becoming stranded amid a rapid transition to clean energy was a risk, pushing it to stop investing in private equity and credit funds which invest in fossil fuel assets. However, ATP cannot pull out of the funds it has already invested in, meaning there would be a phase-out period,” Reuters reported.
Buhl’s statements come in the same week as ATP reported its best-ever annual result in its 2019 financial report. The fund generated DKK 40.7 billion ($5.98 billion) representing a 39.7% net return, with government and mortgage bonds spearheading the return profile. Returns for the previous four years clocked in at -5.9%, 28.4%, 15.2%, and 16.4%.
“For all ATP investments, some degree of effect on one or more of the United Nations’ 17 sustainable development goals will be evident,” the fund said in its 2019 annual report.
Buhl said to Reuters that the fund will engage in shareholder activist-related motions with the companies that have relatively high carbon dioxide emissions in their portfolio and attempt to persuade them to change their approach.
ATP’s intentions make them part of a growing movement of ESG-minded institutional investors looking to decarbonize their portfolios. Investors left with fossil fuel investments after their peers have moved to renewable sources of energy may be at risk.
The New York State Common Retirement Fund, Netherlands’ ABP fund, and a cohesion of pension plans based in London recently announced that they will adopt clear and concise strategies to ramp up their investments in sustainable and renewable energy-related companies.
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Tags: ATP, ESG, Fossil Fuel Investments, Pension Funds, Private Credit, Private Equity, Sustainability