fossil fuel divestment | Pension360

Swedish Pension Divests From 20 Fossil Fuel Companies

One of Sweden’s largest pension funds has announced it plans to divest from $116 million worth of fossil fuel-related holdings.

In an effort to ward off the “financial risk” of climate change, Sweden’s AP2 will cut 20 gas, oil and coal companies from its portfolio. From Chief Investment Officer:

[AP2] is cutting 12 coal companies and eight oil and gas production firms, with a total market value of SEK 840 million, or roughly 0.3% of the portfolio.

“Our starting point for this analysis has been to determine the financial risks associated with the energy sector,” said Eva Halvarsson, CEO of AP2. “By not investing in a number of companies, we are reducing our exposure to risk constituted by fossil fuel based energy. This decision will help to protect the fund’s long-term return on investment.”

In a statement released today, AP2 said its team had reviewed all holdings in fossil fuel companies and assessed the financial risk posed to each one by climate change.

The fund said the coal companies it would sell “face considerable climate-related financial risk, due to the negative environmental and health impacts of coal”. AP2 also cited competition from gas and renewable energy sources as affecting demand for coal.

AP2 also identified “serious climate-related financial risks” for a number of oil producers, particularly involving “high-cost projects” such as extracting oil from oil sands. AP2 said it believed it was “highly likely that these projects may either be stranded or unprofitable”.

The Swedish fund is the latest institutional investor to reduce or completely scrap their investments in fossil fuel producers. Stanford University’s $18.7 billion endowment said in May that it would sell out of fossil fuel-related companies, while the $860 million Rockefeller Brothers fund in September announced its intention to divest from coal and oil. A group of US charities representing $1.8 billion in assets also took similar steps at the start of this year.

AP2 manages $36.7 billion of assets.

Photo by Penagate via Flickr CC

Washington Pension Board Declines to Divest From Fossil Fuels

The Washington State Investment Board (WSIB), the entity that handles investments for the state’s pension systems, at its latest board meeting weighed whether to divest from fossil fuel-based companies.

The Board ultimately decided against divestment. But the members said they would continue to evaluate whether climate change posed any risk to pension investment returns, and would use their power as major shareholders to push companies for transparency about financial risks posed by climate change.

The WSIB has major stakes in oil and coal investments.

Further details on the board’s decision, from the Olympian:

When evaluating a future investment, the SIB said it will consider whether climate change poses any financial risk to its expected returns.

It should not stop investing in lucrative but controversial energy projects. That would expose the board to potential legal action over its failure to produce as much value as possible.

Outgoing SIB Chair Jim McIntire, who is also the state Treasurer, proposed a more responsible strategy for showing sensitivity to environmental issues. He said the SIB should press companies for greater transparency about the risk from climate change, and how they are mitigating that risk.

A large institutional investor such as the state of Washington can use its leverage to change company policies. McIntire said that’s the SIB’s preferred approach.

[…]

The SIB’s legal mandate is to make money for the pension funds it manages. Its fiduciary duty is simply to get the best return possible for the individuals who will someday depend on those pensions.

But setting investment policy is more complex than that. The SIB members are responsible for examining the short- and long-term risks of its investments. And that requires assessing both internal and external factors that might influence an investment’s return.

The WSIB presents an argument many pension funds have made over the past few months: divestment isn’t as effective as lobbying for change as a major shareholder.

No public pension funds in the U.S. have yet divested from fossil fuel companies on the grounds of climate change.

Vermont Fund May Become First To Hit Gas On Fossil Fuel Divestment

Vermont Gov. Peter Shumlin had previously been against the state’s pension fund divesting from fossil fuel companies.

Shumlin talked to the Associated Press about divestment last November:

“I believe that by keeping a seat at the table and by encouraging smart investments, we can make progress towards a cleaner, greener economy while still meeting our obligations to pay for the retirement of [state and municipal employees] in the most responsible way for taxpayers,” Shumlin told the Associated Press…

In other words: they can do more to effect change as a shareholder of fossil fuel companies. His argument against divestment echoes what we’ve heard from other pension funds around the country.

But Vermont’s view might be changing. Last week, Shumlin went so far as to call divestment from fossil fuels a “good idea”. Reported by Seven Days:

“I actually think it’s an intriguing idea,” Shumlin said. “And, you know, I think that, over time, we’ll find ways that we can be more active in that effort. I would like us to be. As you probably know, we have a fiduciary responsibility to the taxpayers to ensure that, you know, we’re getting a good return on our investments. So it’s going to take some time to make the transformation, but I think it’s a good idea.”

[…]

“I think it’s great,” [environmentalist and scholar Bill] McKibben told Seven Days by email, referring to Shumlin’s shift. “He’s been talking about climate change in powerful ways since [Tropical Storm] Irene, and this (assuming he actually follows through, and soon) is an obvious and easy move (Vt. led the way in divestment from apartheid, after all).”

“And it’s hardly revolutionary,” McKibben added, noting that the Rockefeller Brothers Fund, whose $860 million comes from Standard Oil money, committed to divestment on Sunday. “If the heirs to the world’s greatest oil fortune think it’s unwise and immoral to invest in fossil fuel, what the hell excuse do any of the rest of us have?”

More and more, pension funds are thinking about this issue. CalSTRS and other major institutional investors announced last week they are helping to fund a study on the effect climate change would have on markets.

Photo: Paul Falardeau via Flickr CC License

CalSTRS, Others Bankroll Study on Economic Impact of Climate Change

To date, there have been zero state-level pension funds that have heeded public calls to divest from fossil fuel-dependent companies.

But that doesn’t mean some pension funds aren’t interested in learning the impact climate change could have on their investments in the future.

Several of the world’s largest pension funds, including CalSTRS, have joined with Mercer to conduct a study forecasting the impact of climate change on markets over the next 40 years. From Chief Investment Officer:

The study aims to map out potential climate scenarios and their impacts on economies and markets, with forecasts stretching out to 2030 and 2050.

It follows a weekend of marches across the world calling for action on climate change, as the United Nations prepares to meet for a Climate Summit in New York on September 23.

Among the pension funds signed up to the study are the California State Teachers’ Retirement System (CalSTRS), New Zealand Super, and Sweden’s AP1. In total, Mercer said asset owners representing $1.5 trillion were backing the survey.

Jane Ambachtsheer, head of Mercer’s global responsible investment team, said the survey’s objective was “to help investors make robust, well–researched investment decisions that factor in a consideration of climate change”.

“New data points and scientific evidence are now available, including the topical subject of the potential risk posed by so-called ‘stranded’ carbon assets,” she added. “Ultimately, it’s about enabling institutional investors to adapt over the longer-term.”

Brian Rice, portfolio manager at CalSTRS, was among those welcoming the launch of the study. “The multi-scenario, forward looking approach to this study makes it unique,” he said. “Investors will be able to consider allocation optimisation, based on the scenario they believe most probable, to help mitigate risk and improve investment returns.”

A few days ago, CalSTRS announced plans to triple its investments in clean energy.

Photo: Paul Falardeau via Flickr CC License

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