Pension funds in Nordic countries stand out as being the most willing asset owners in Europe to disclose information on the extent to which their investments are in line with official targets on climate, according to a recent survey from the Worldwide Fund for Nature (WWF).
The Worldwide Fund for Nature (WWF) released its report “European Asset Owners: Climate Alignment of Public Equity and Corporate Bond Portfolios” during the 24th annual United Nations Climate Change Conference (known as COP24) that took place in Poland at the end of 2018. The report analyses the extent to which Europe’s most substantial asset owners are aligning their public equity and corporate bond portfolios with the Paris climate agreement’s goal of keeping global warming well below 2°C.
Initially, the WWF asked 88 of the largest asset owners in 11 countries in Europe to undertake the assessment. Specifically, respondents were asked to divulge their climate alignment results for a set of key climate-relevant technologies: coal power, renewable power, coal mining, oil production and gas production. Somewhat disappointingly, many were reluctant to disclose any information and only 33 agreed to reveal their climate alignment results.
Sebastien Godinot, an economist at WWF European Policy Office and lead author of the report said: “Investment decisions need to be guided by the risk considerations of a rapidly changing natural world. WWF applauds the 33 asset owners that disclosed forward-looking climate scenario analyses for demonstrating best practice. Asset owners that choose to undertake forward-looking climate scenario assessments will put themselves ahead of the curve in understanding the climate-related risks and opportunities within their portfolios.”
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Nordic countries lead the way in transparency
However, the reluctance to disclose results was less obvious when it comes to the Nordic region. 27 of the 33 respondents featured in the report are from Nordic countries. The WWF stated that, when it comes to Denmark and the other Nordic countries, there is an extensive disclosure of climate alignment results and several investors are actively engaged in international initiatives.
In the case of Denmark, all of the eight Danish pension funds asked to undertake a climate alignment assessment fully disclosed their results to the report. These include actors such as ATP, Danica Pension, Industriens Pension, Pensam, PensionDanmark, PFA Pension, PKA and Sampension.
Furthermore, the report states “In Nordic countries there is extensive disclosure of climate alignment results and several investors are actively engaged in international initiatives. In the Netherlands and France there is some degree of disclosure. In other countries (Belgium, Germany, Italy, Spain and United Kingdom) there is zero disclosure”.
More effort needed
The main finding of the report is that greater efforts are needed to ensure that public equity and corporate bond investments align with the well below 2°C goal. “There are encouraging indications that asset owners’ investments are partly aligned with that goal for some of the technologies included in the research. However, none of the asset owners is aligned for all technologies,” the report says. WWF also found indications of a growing recognition among asset owners of the importance of climate-related financial risks. 55 out of the 88 contacted asset owners (61 per cent) are actively engaging in forward-looking climate scenario analysis.