The board of PKA has agreed it will sell out of companies being targeted by Climate Action 100+ if they are out of step with the Paris Agreement by as early as 2022, according to an ESG specialist at the Danish pension provider.
Speaking during a panel today on active ownership, held as part of this week’s RI Asia conference, ESG Manager Louise Aaagard Jensen said the DKK350bn fund would divest from firms that “have not aligned their business strategy or show serious plan of how they will make sure we reach the goals of the Paris Agreement” by the end of CA100+’s lifetime.
CA100+ is a collaborative engagement initiative whose members are responsible for some $60trn of managed assets. It targets 167 publicly-listed companies with the major emissions, asking them to align with Net Zero. Launched in December 2017, the project was originally slated to conclude after five years – making its deadline December 2022 – but there has since been talk of extending the initiative. Jensen said her expectation is that the project will conclude in either 2022 or 2023.
‘You need to have an escalation process in place. There needs to be a consequence for active ownership to actually work’ – PKA’s Louise Aaagard Jensen
Earlier this year, CA100+ published its inaugural ‘benchmark’, outlining how the 167 companies were progressing on climate. It revealed that, despite 83 having Net Zero ‘ambitions’, none had disclosed comprehensive strategies to get there. None have committed to aligning future capital expenditure with climate goals, either.
“It's always a dilemma when you have to consider to what extent can you use active ownership and when should you divest,” said Jensen during today’s panel. “You need to have an escalation process in place. There needs to be a consequence for active ownership to actually work.”
“For example, if the company does not reply when you want to engage with it, or if they continue to breach PKA’s policies or guidelines.”
A recent RI article highlighted the growing number of investors that are running out of patience with companies that will not engage, or where influence is seen as too limited. ABP, Europe's largest public sector pension fund, plans to exit fossil fuel producers, citing “insufficient opportunity” for climate stewardship.
Yesterday, AXA Investment Managers announced it will sell out of ‘high-impact climate laggards’ if Net Zero progress is not substantial by 2025.
Jensen said divestment was done on a “case-by-case evaluation”, with the final decision being made by PKA’s ESG committee, which includes all of the fund’s directors.