PKA has been singled out as having the worst 2ºC-aligned public equities portfolio out of 30 of Europe’s largest asset owners, in what it calls a “questionable report” published by WWF this week.
The Danish pension fund, which has a long-standing reputation for being proactive on environmental, social and governance issues, disputes the finding of the report, titled European Asset Owners: 2°C Alignment and Misalignment of Public Equity Portfolios.
The research assesses the alignment of the 30 firms’ coal mining, coal and renewables investments against a 2°C scenario, and has identified PKA as the only one to be misaligned with all three sectors.
Of Europe’s 100 largest asset owners, WWF engaged with 80 for the study, of which only 30 disclosed their public equity holdings. Many already had some details in the public domain, because of regulatory requirements or a desire for transparency with broader stakeholders.
In accordance with the TCFD’s recent recommendations, the report – which claims to be the first of its kind – uses asset-level data to create scenario analysis for each investor’s portfolio. It uses the Sustainable Energy Investing Metrics tool created by 2° Investing Initiative, testing the holdings against the International Energy Association’s 2°C scenario for 2020.
PKA came out the worst from the findings, but it was not the only surprising name on the list. Swedish pension fund AP7 was found to be misaligned on both its coal power and renewables holdings. Nordea was also found to be misaligned against coal and renewables.
Six asset owners were found to be well-aligned with a 2°C scenario across all three sectors: Finland’s Varma, StatePension, Elo, and Ilmarinen; Norway’s GPFN; and Denmark’s ATP.Pelle Pederson, Head of Responsible Investment at PKA has, however, challenged the report’s findings.
“We generally respect and welcome WWF’s efforts to promote sustainable investing. Therefore, we are surprised WWF is willing to publish a questionable report on European asset owners’ alignment with a 2°C scenario,” he told RI, claiming that “the report only partially covers the aggregate exposure to listed equities, which we believe is counterproductive to the discussion around climate risk. The relevant question is how the total portfolio is exposed to climate risk.”
The report’s co-author, Jan Vandermasten, a policy officer for sustainable finance at WWF, told RI that “all the asset owners had the opportunity to look at the data, correct the data, or provide more updated/corrected data” before the analysis took place.
Lack of disclosure by asset owners is cited throughout the report as a limiting factor to its scope. The authors call for further disclosure, and recommend that financial policy makers and regulators “swiftly transpose the recommendations of the TCFD into European and/or national legislation and regulation” to accelerate the process.
WWF said it had taken heart from the fact that “almost all the 30 asset owners are aligned with the 2°C benchmark for 2020 for at least one technology”, as this “suggests that it is feasible for asset owners to align their public equity portfolios with the 2°C target…through appropriate investment strategies and their implementation”.
Note: This article was corrected 07/07/2017 to remove a list of asset owners claimed not to have disclosed. WWF highlighted that the asset owners may have disclosed, but were not included in the report.