Portfolio level – Portfolio decarbonisation reference target
Baseline date: 31 December 2019
- Listed equities and corporate bonds: 55.21 tCO₂e/$mn Invested (8,29 tCO2e/DKK mn invested).
- Real estate: 19.7 kgCO2/sqm/year
Target year: 2025
- Listed equities and corporate bonds: 37% reduction of tCO₂e/mn DKK Invested by 2025.
- Real estate investments: 52% reduction of CO2e/m2 by 2025 (covering buildings in use).
GHG scopes included: Our 2019 baseline and target setting covers financed scope 1 and 2 emissions for listed equity, corporate bonds, and real estate. On a portfolio level, we track and report on scope 1, 2 and 3 emissions in absolute terms but are aware of inadequate data quality in scope 3. As data quality and availability improves, we will look to include this in future iterations of the Net Zero Plan for future emissions, engagement, and alignment targets.
Asset classes in scope: Listed equity, corporate fixed income (European US and Emerging markets High Yield) and Real estate (Danish properties).
Methodology/net zero scenarios: Methodology and calculations are based on IIGCC´s Net Zero Investment Framework combined with IEA´s two scenarios (Sustainable Development Scenario and Net Zero Emissions by 2050 Scenario) and additionally on the principles in Finans Danmark´s CO2e-model (Framework for Financed Emissions Accounting, Nov. 2020). Emissions are calculated based on EVIC. In accordance with Finans Danmark´s CO2e-model (Framework for Financed Emissions Accounting, Nov. 2020). According to the SDS scenario by IEA, our portfolios emissions will exceed its carbon budget in 2034. We have started our work with target setting for 2030 including a focus on improved data.
Emissions metrics: We have set decarbonisation targets on financed emissions (scope 1 and 2) in relative emissions terms. However, AP Pension’s annual report discloses emissions annually both absolute (total emissions and financed carbon) and intensity based (carbon footprint and weighted average carbon intensity, WACI) on our full portfolio in accordance with the TCFD recommendations.
Portfolio level – Investment in climate solutions target
Baseline year: 2019
Baseline performance: Investments in climate solutions were:
- 1.5% of AUM in 2019
- 9.9% of AUM in 2020
- 12.7% of AUM in 2021
Disclosed in AP Pension´s annual reporting.
Target years: 2023, 2025, 2030
- 2023: 15% invested (of total AUM) in climate solutions (“green investments”) according to guide/definitions from Danish Insurance & Pension Association (IPA).
- 2025: 18% invested (of total AUM) in climate solutions (“green investments”).
- 2030: 25% invested (of total AUM) in climate solutions (“green investments”).
Methodology: AP Pension calculates green investments based on the methodology and guidance provided by the Danish Insurance & Pension Association (IPA) green classification system. The methodology is currently based on investments supporting SDG 7 regarding “affordable and clean energy” and covers all asset classes including, but not limited to, listed equity, green energy infrastructure, green bonds and real estate. The methodology will use the EU taxonomy from 2023 (reporting year) as a measurement of green investments.
Asset level – Portfolio coverage target
Baseline date: 31 December 2019
Baseline performance: A mix of data sources are used for our analysis of alignment of the portfolio, such as Climate Action 100+ Net Zero Company Benchmark, SBTi, SDS and NZ-scenarios from ISS (based on IEA) and temperature score for the portfolio.
We have not calculated proportions/allocation in the different alignment classes yet.
Target year: 2025
Target: We analyse the degree of Paris alignment of our portfolio companies, and we conduct regular screenings to identify the major challenges based on the portfolio companies’ specific emissions performance and their decarbonisation strategies. The purpose is to increase the proportion of assets defined as net zero or aligned to net zero.
Specific targets for the proportions of assets in the different alignment classes are not set.
Actions taken to increase alignment is focused on engagement with companies that seem not to be on a net zero pathway and we combine it with an escalation strategy.
Asset classes in scope: Listed equity, corporate fixed income, real estate
Data sources: Listed equity & corporate fixed income: Climate Action 100+ Net Zero Company Benchmark, SBTi, climate data from ISS. Real estate: Energy norms and marked standards.
Asset level – Engagement threshold target
Target: AP Pension has adopted a strategy for active ownership which ensures that at least 70% of the financed CO2 emissions in 2025 are either net zero, aligned to a net zero pathway or subject of direct or collective engagement and stewardship actions.
Approach: We prioritise our engagement based on a holistic analysis. Climate Action 100+ Net Zero Company Benchmark is used as key tool to identify areas where companies need to improve and where we focus our intensified active ownership. Focus is on companies not aligned to a net zero pathway or companies not able to demonstrate a plan for a transition to net zero. We will also increase our dialogue and climate requirements to our external managers.
Methodology: Combining our target for green investments by the end of 2030 (25% of AUM), CO2e-reduction (-37% CO2e/$bn invested in listed equity and corporate bonds by 2025) and CO2e-reduction (-52% CO2e/m2 in real estate by 2025), we are consistent with delivering a fair share of the 50% global reduction in CO2e-emissions by 2030. In addition, AP Pension´s combined portfolio is at a good starting point with low emissions relative to the benchmark (27% less than the benchmark MSCI ACWI for listed equity and corporate bonds) and low fossil exposure.
Operational emissions: AP Pension measures its operational emissions, which are published in AP Pension´s annual report and CSR report. AP Pension is planning to incorporate reduction targets for the operational emissions.
Fossil fuel investment: AP Pension developed a new fossil strategy/policy in August 2022. This strategy includes the following exclusion criteria:
- Coal companies are excluded if they have >5% revenue from the extraction of thermal coal or have expansion plans.
- Utility companies are excluded if they have >25% revenue from energy production with thermal coal or they have expansion plans. A holistic assessment is made of companies that are close to the limit values.
- Fossil companies are excluded if they have >5% revenue from the extraction of tar/oil sands.
- Oil and gas companies are excluded if they have >20% revenue from upstream activities. A holistic assessment is made of the remaining oil and gas companies that have expansion plans with a view to divestment.
Fossil companies which, according to the holistic assessment, are assessed to have taken significant steps, but cannot yet demonstrate a transition compatible with the Paris Agreement (transition companies), will be kept on AP Pension’s observation list. AP Pension continue to monitor and enhance active ownership of the companies included on the observation list.
AP Pension case studies
AP Pension: Adopting a strengthened fossil strategy
21 March 2023