Portfolio level – Portfolio decarbonisation reference target
Baseline date: 31 December 2018
Baseline performance: 109 tC02e/$mn
Target year(s): 2024
Target(s): -45% CO2e/$mn invested by 2024
GHG scopes included: Our target setting covers financed scope 1 and 2 emissions. On a portfolio level, we track scope 3 emissions, but currently only include them in our sectorbased target setting in order to overcome issues related to double-counting, see below.
Asset classes in scope: Listed equities and corporate bonds.
We have not set reduction targets for our real estate portfolio, as it is already ahead of 1.5 C pathway according to CRREM (2 tC02e/$mn)
Methodology: In PensionDanmark, we continuously work to improve the completeness and accuracy of our data. We also try to implement changes to our calculation methods retrospectively to ensure the comparability of individual years where possible.
The data coverage below is calculated as per end-2021.
- Listed equities: 98.5 pct.
- Corporate bonds: 80.7 pct.
CO2 emissions from the remaining portfolio is estimated based on the carbon footprint distributed by geography and sector (according to the Global Industry Classification Standard) based on the data available for the respective asset.
We assume that the carbon footprint on average is the same for all corporate bonds/listed equities within the same sector and geography. The average is subsequently applied for that part of the portfolio for which observations are not available. The distribution has been made based on 12 sectors and 2 geographical segments.
Real estate coverage is some 93 pct.
Net zero scenarios: Our targets imply a maximum 1.5°C warming above pre-industrial levels. We use both TPI and OECM scenarios based on IPCC P1-P3.
Emissions metrics: PensionDanmark has not set absolute carbon emission reduction targets because of strong positive net cash flows into the investment portfolios from our members.
Our overall aim is to reduce our carbon footprint going forward to 2025.
Portfolio level – Investment in climate solutions target
Quantitative target: Baseline date: 31 December 2019
Baseline performance: USD 6.2 $bn (end-2019)
Target date: 2025
Target: By 2025, PensionDanmark aims to own 1,300 MW of green power capacity.
Furthermore, we aim our green infrastructure to avoid Co2 emissions of more than 2 mio. Tonnes by 2025.
Currently, 16 pct. of our AuM (including commitments) is invested in climate solutions.
Methodology: PensionDanmark has been investing in green infrastructure for the past ten years and had, by the end of 2021, investments equivalent to just below 900 MW of operating green power capacity.
PensionDanmark has allocated more than 3.3 $bn to renewable energy infrastructure all over the world by the end of 2021 based on wind, biomass, solar cells and new technologies as P-t-X. Almost half of the allocation has not been deployed yet. For the projects already in operation, the derived CO2 savings for 2021 amounted to just above 1.5 million tonnes.
Just over half of PensionDanmark’s infrastructure investments contribute towards phasing out fossil energy sources from the global energy mix. Among others we invested in CIP’s Energy Transition Fund I that support projects that develop carbon-neutral green fuels and raw materials for industries for which transition is difficult. Furthermore, we invested in the Danish cleantech business, Stiesdal, which is engaged in the development of four different climate technologies: floating offshore wind foundations, energy storage technology, Power-to-X technology and pyrolysis plants for atmospheric carbon capture and storage, and biofuel production for the airline industry.
PensionDanmark is inclined to participate in minimum three roundtables with development finance institutions to enhance blended finance of climate solutions in the Least Developed Countries and hence support Just Transition on a global scale.
Asset level – Portfolio coverage target
Baseline date: 31 December 2019
Baseline performance: One of our main goals is to invest in companies that embark on a green transition or produce solutions to global climate challenges. Due to these goals, we have chosen to focus on sectors with a substantial negative climate footprint:
- Oil and Gas
By the end of 2019 only a few companies in oil and gas and the shipping sector had Paris aligned business models. Some 50 pct. of the listed equity investments in utilities were Paris aligned. While none in the cement industry.
Target date: 2024
Target: Our ambition is that 50 pct. of our investments in the material sectors Oil and Gas, Shipping and Cement to be at least “aligning” towards a net zero pathway by 2024. This should also be the case for 80 pct. of our investments in the utilities sector.
By the end of 2024, we aim to reduce our climate footprint, scope 1+2+3, within our focus sectors, see above.
Our reduction targets for climate footprint in our listed equities portfolio are as follows:
- Oil and Gas by 20%
- Utilities by 35%
- Cement by 10%
- Shipping by 15%
These sector targets are developed with input from the OECM model and TPI on sector pathways.
Asset classes in scope: Listed equities and corporate bonds We have not set reduction targets for our real estate portfolio, as it is already ahead of 1,5 C pathway (2 tC02e/$mn)
Data sources: Listed equity and corporate bonds: CA100+ benchmark, Transition Pathway Initiative, OECM, IPCC scenario decarbonisation curve consistent with a 1.5C scenario
Real estate: assessment based on CRREM
Asset level – Engagement threshold target
Target: 70 pct.
Approach: PensionDanmark has set engagement targets that include supporting collaborative and single engagements, backing SBTi approved targets and net-zero commitments to make a real world change.
For instance, PensionDanmark has committed to execute 200 (baseline end-2019) collaborative engagements before 2025 supported by asset owners, among others CA100+. During the same period, we also strive to have 350 investees with either SBTi aligned
targets/commitments to net-zero before 2050 following engagement or having SBTi approved targets following engagement.
PensionDanmark also engages in dialogue with authorities and other stakeholders regarding societal issues, particularly how private investors can become involved in creating new and innovative solutions.
Methodology: PensionDanmark has in our capacity as investor, endorsed working towards a world economy with Net-Zero Green House Gas emissions before 2050 in order to limit the global rise in temperature to 1.5°C. Measures to achieve this include active ownership and investments in climate-friendly technologies, according to the above.
In 2020 we sat interim targets on the way to fulfil our net-zero commitment; targets that require change well before the decade has ended. These interim goals imply a maximum 1.5°C warming above pre-industrial levels – the most ambitious target defined in the 2015 Paris Agreement.
Fossil fuel investment: PensionDanmark excludes all mining companies involved new (thermal) coal projects from the investment universe.
Also companies with more than 5 per cent of revenues from production of (thermal) coal or oil sands are on our exclusion list.
Finally, Oil and Gas companies with a low transition score in PensionDanmark’s internal model are also excluded.
See exclusions list here.
Operational emissions: We have set absolute targets regarding our scope 1 and 2 emissions. By 2025, we aim to have scope 1 emissions of 20.3 tonnes and scope 2 emissions of 61.5 tonnes (market-based method) corresponding to a fall of 55 and 13 pct.
respectively compared to 2021 levels.