8 september 2013

Swedish pension funds urged to dump fossil fuel holdings

By Caroline Liinanki, Financial Times, September 8, 2013

Sweden’s cluster of state pension funds face political pressure to divest from all of their fossil fuel holdings.

The Swedish Centre party has called for all of the country’s national pension funds to sell off their holdings in fossil fuel corporations in order to “climate proof” and protect the value of their investments.

Martin Ådahl, chief economist at the Centre party, which is part of Sweden’s four-party government coalition, told FTfm that the AP funds had been “impotent” and that investments in fossil fuels represented a financial risk to the long-term value of the country’s pension reserves.

The four main AP funds, with SKr971bn ($146bn) of assets under management, have some of their largest foreign equity holdings in oil and gas companies.

The Centre party’s call for divestment follows a report by Lord Nicholas Stern, a professor at the London School of Economics, and Carbon Tracker, a think-tank. It warned of a “carbon bubble” and cautioned that at least two-thirds of listed companies’ oil, coal and gas reserves were “unburnable” if global warming were to be kept below two degrees.

Mr Ådahl admitted that the aim was not to legislate, which he recognised would be both difficult and politically sensitive. “We want to bring the issue to public debate. We are encouraging the AP funds to take action,” he said.

Last year, AP4 invested SKr1.3bn in a low-carbon equity strategy. However, Chevron, Royal Dutch Shell and ExxonMobil also make up three of the SKr241bn fund’s five largest foreign equity holdings.

Arne Lööw, AP4’s head of corporate governance, acknowledged the contradiction. “Excluding all fossil fuel companies would be too great a risk,” he said.

Nordic life and pension company Storebrand, which has NKr450bn of assets under management, excluded 19 fossil fuel companies from its investment line-up in July. The exclusion was based on concerns around the long-term financial risks of remaining invested in carbon dioxide-intensive companies.

“The reason for divesting is to secure long-term returns. The greatest risk for investors is to do nothing,” said Christine Tørklep Meisingset, head of sustainable investments at Storebrand.

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