Länsförsäkringar AB (LFAB), a Stockholm-based insurance group, is to exclude mining and energy companies which derive more than 5% of revenue from thermal coal or the extraction of oil from tar sands. Previously, the firm had an exclusion threshold of 20% of revenue.
However, LFAB will consider retaining companies generating between 5-20% of revenue from thermal coal power generation if they can demonstrate a shift toward a more sustainable energy mix. These are companies which have either committed to an approved Science Based Target (SBT) or alignment with Transition Pathway Initiative’s 2 degree scenario, or has a higher revenue share from renewable energy compared to fossil fuel power generation.
The policy will be applied to direct investments across the group’s non-life and life insurance assets, and Länsförsäkringar-branded funds under its mutual fund unit – which includes six passive strategies. LFAB will now exclude heavyweights such as Anglo American, BHP, Duke Energy and Origin.
But based on its new climate transition criteria, LFAB will retain 12 companies including Enel SpA and NRG Energy for adopting an approved Science Based Target, and Drax Group and ENGIE Brasil Energia for deriving more power generation revenue from renewables compared to fossil fuels.The new policy was informed by a recent scenario analysis conducted on LFAB’s portfolios which identified utilities as one of five carbon-intensive sectors which were inconsistent with the goals of the Paris agreement. Over the coming years, the firm will look to address other sectors, for example Oil and Gas, with the full range of its “investment toolbox”, divestment being only one.
“The rationale of the new policy is to mitigate both climate risks and financial risks in our institutional portfolios and funds”
LFAB’s Head of Responsible Investments Kristofer Dreiman told RI: “The rationale of the new policy is to mitigate both climate risks and financial risks in our institutional portfolios and funds, and to over time harmonize our portfolios and funds with the Paris agreement’s objective to limit global warming well below 2 degrees.
“In 2020, we will be using tilting a lot more to address our portfolio exposure to CO2 emissions and water risk.”
LFAB comprises of a network of 23 mutually-owned insurance companies, one in each of Sweden’s counties, which owns and operates a bank and mutual fund company.