OSLO, June 29 (Reuters) - Investors are starting to turn the heat up on companies over their strategies to tackle climate change in line with the agreement reached in the 2015 Paris climate talks.
Sweden’s largest national pension fund AP7 set a high benchmark in June when it named six firms it said had breached the Paris accord and ditched them from its portfolio.
Below are comments or strategy details from several funds:
“The climate issue has been Robur’s most prioritised sustainability issue for 10 years,” said Liza Jonson, CEO of Robur, the Nordic region’s largest fund manager, owned by Swedbank.
“The Paris agreement and the events in connection with that were therefore crucial to our decision (in 2016) to exclude companies that derive more than 30 percent of their turnover or more from coal. We were among the first in the business to do so.”
“We are working (mainly) with dialogue, we are trying to persuade companies to sell off or close down business that is not sustainable,” Peter Lundkvist, head of the ethical committee for Sweden’s AP1, AP2, AP3 and AP4 pension funds.
“It’s difficult for us to relate to how you’d say something is non-Paris compliant, but that methodology will become more and more sharp as time goes on,” said Ulrik Dan Weuder, head Of ATP’s global direct investments.
The chief executive officer of the $960 billion fund, Yngve Slyngstad, said the fund was asking banks in which it has invested to disclose how their lending contributes to greenhouse gas emissions, after measuring in the past the carbon footprint of its investments in equities and bonds.
Since 2016 the fund has banned investment in firms that derive more than 30 percent of their turnover or activity from coal, mostly coal producers and utilities.
By July, the fund’s ethics watchdog is expected to recommend the fund excludes or puts on a watch list the first of several firm in the oil, cement or steel industries, for producing an “unacceptable” level of greenhouse gas.
“KLP and the KLP funds’ guidelines for responsible investment include severe environmental damage as a criterion for divestment. Although we interpret this criterion to include climate as well, we see the need to make this more explicit,” said Annie Bersagel, acting head of responsible investments at KLP, Norway’s largest life insurance firm with $72 billion under management.
“We are in the process of updating the KLP and KLP Funds’ guidelines to include a specific climate criterion. This will be harmonized with the climate criterion from the ethical guidelines for the Norwegian (sovereign wealth fund).”
The state pension fund, which managed 19.2 billion euros ($22 billion) as of March 31, included the Paris climate agreement in its investment guidelines last summer.
“It is part of our review process, but we don’t do separate evaluations based on it,” said CEO Timo Viherkentta, adding the fund monitors its portfolio’s carbon footprint annually. But he said VER had not excluded any firms for environmental reasons.
“Because we don’t invest directly in companies outside the Nordic region, companies like the ones AP7 excluded were not in our portfolio in the first place.”
“We think engagement investment is about promoting companies to be involved with ESG through engagement,” said Hiroichi Yagi, adviser at the fund, a leader in Japan on environmental, social and corporate governance (ESG) issues.
Asked about AP7’s initiative, he said: “We have no such plan to follow suit. And we have not heard of any Japanese pension funds that are considering taking such steps.”
Asked about climate change issues, the pension authority’s head of investment, Sharon Smith, said: “It could be something that comes up, but it could be a year or so before we get to that stage. We’re just not at that stage at the moment.”
“Except for the AMP Capital Responsible Investment Leaders (RIL) Funds we haven’t filtered out stocks by fossil fuel exposure. We have taken a different approach,” said Ian Woods, head of ESG investment research.
“Given a significant exposure to the Australian economy, we have worked with other investors through the IGCC (Investor Group on Climate Change) to engage in the debate to encourage development of policy that will drive the transition of the economy” to meet Australia’s Paris Agreement commitments.
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“We have been improving our understanding and approach to climate change including the investment implications of the Paris Climate agreement,” said Pablo Berrutti, head of responsible investment.
“We have also improved our disclosure to ensure our clients have the information they need to better understand portfolio risks and opportunities.
“Several barriers exist to achieving better management of climate change risks across the industry including investment mandate design issues - for example, risk constraints - use of standard benchmarks for performance and risk measurement, and a focus on short-term performance.”
“We currently monitor climate change risk in the portfolio. We undertake a carbon footprint analysis of our international and domestic equity portfolios regularly to understand our investment exposure to carbon,” said Kelly Christodoulou, governance manager.
“The most recent analysis of our portfolio indicated that both our international and domestic portfolios have lower carbon risk than the applicable benchmarks.
“We believe that the best way to manage ESG issues in the portfolio is through active engagement with the companies that we invest in, as this creates alignment between improved ESG outcomes and investment returns.”
$1 = 0.8754 euros Reporting by Reuters correspondents in in Amsterdam, Stockholm, Paris, Helsinki, Sydney, London, Dublin, Madrid, Lisbon and Tokyo; Editing by Gwladys Fouche and Edmund Blair