PFA, Denmark’s largest pension fund with DKK560 billion ($82 billion) in assets, is launching a pension product that allows participants to invest their retirement savings in climate-focused investments that it says will be carbon neutral in five years at the latest.
Beginning this summer, PFA Climate Plus will be available to the fund’s customers to allow them the opportunity to “significantly step up” how much their pensions contribute to cutting carbon dioxide emissions, the fund said.
“As Denmark’s largest pension company with more than 1.3 million customers, PFA has a special responsibility to contribute to a sustainable development of society,” PFA Group CEO Allan Polack said in a statement. “The investment of pension savings is one of most significant ways in which an individual can make a difference.”
All asset classes in PFA Climate Plus will consist of companies that actively work on cutting back the world’s carbon dioxide emissions and have investments in green assets and projects such as offshore wind farms and sustainable properties. None of the investments will be in oil, coal, or gas.
The fund said the new investment vehicle will start off by emitting 60% less carbon dioxide than the MSCI World Index, and, in addition to being carbon neutral in five years, it hopes to be carbon-negative in 10 years. This means it will remove more carbon dioxide from the atmosphere than the investments will contribute. Part of the PFA Climate Plus portfolio also is expected to be invested in venture capital firms and will be focused on tech companies that hold a potential to accelerate the green transition.
“We wish to set a new standard for sustainable pension investments to counteract the vast climate changes,” Pollack said. “At the same time, we want to make it as easy as possible for the individual customer to decide how much of the savings the customer wishes to place in this especially climate-focused pension portfolio.”
The selection of assets in the new product will be a two-step process. The first step involves looking at PFA’s overall investment criteria, such as return potential and the fund’s own policy for responsible investments and active ownership. The second step includes using climate-focused criteria to assess the potential of the assets regarding their contribution to the green transition.
The fund said that because there are fewer potential investment objects available as a result of the climate-focused selection criteria, the return may fluctuate more in isolated periods. However, it said the long-term return expectations will have the same level of risk and return expectations as its overall market rate product PFA Plus.
PFA said it will continue to practice active ownership, and, with PFA Climate Plus, it says it will be even more closely involved to ensure that “the companies live up to their plans and ambitions” related to the green transition.