PFA owns more than $400m in bonds linked to environmentally damaging fossil fuel projects even though the Danish pensions and insurance provider has pledged to cut carbon emissions and promote the transition to a more sustainable future.
Environmental promises made by pension funds and asset managers are drawing critical scrutiny from campaigners who complain that the finance industry is more interested in flattering its reputation through “greenwashing” than addressing the task of decarbonising society.
PFA, which oversees assets of DKr730bn ($117bn) on behalf of 1.3m individual customers and 6,000 corporate clients, supports goals to limit global warming agreed at the 2015 Paris climate change conference. It has committed to ensuring that its investment portfolio is carbon neutral by 2050 as a member of the UN-backed Net-Zero Asset Owner Alliance.
But such pledges are weakened by its involvement in the financing of tar-sands oil production in Canada and the expansion of a thermal coal project in Vietnam.
PFA owns bonds worth about $187m issued by the province of Alberta in Canada, a major producer of tar-sands oil, according to the Anthropocene Institute, a Stockholm-based research group that focuses on climate risks in fixed-income portfolios.
Oil extracted from tar sands generates more carbon-dioxide emissions than most other types of crude and releases other toxic substances into the environment. Alberta accounts for an estimated 71 per cent of global tar-sand reserves.
“It is shocking that PFA is the second-largest owner behind Vanguard of the international bonds issued by Alberta. It seems PFA hoped that it could run substantial fossil fuel risks in its fixed-income portfolio while also peddling new climate-friendly products to clients,” said Ulf Erlandsson, the founder of Anthropocene Fixed Income Institute. It is funded by the Growald Family Fund, a philanthropic donor founded by members of the Rockefeller family.
PFA also owns bonds worth $45m issued by Japan Bank for International Cooperation as well as $112m of bonds issued by Export-Import Bank of Korea. The two Asian banks are co-financiers of the Vung Ang II coal-fired power plant in Vietnam.
PFA also ranks as the biggest owner of bonds issued by EnQuest, the London-listed North Sea oil producer, with a holding worth about $72m.
“All of these bonds should be completely excluded from PFA’s fixed-income portfolio due to their climate risks,” said Erlandsson, a former fixed-income portfolio manager.
PFA declined to discuss any of its individual bond holdings.
Christian Storm Schubart, head of ESG at PFA Asset Management, said: “We are committed to transitioning our investment portfolio to net-zero greenhouse gas emissions by 2050. This will include regularly reporting and intermediate target-setting every five years in line with the Paris Agreement.”
Storm Schubert added that PFA had also reduced its equity holdings in gas and oil companies in 2019 and 2020.
Erlandsson said those reductions were welcome but PFA “must also take similar urgent steps to reduce outsized climate risks in its fixed-income portfolio if it is serious about its commitment to the Paris Agreement”.
“Credibility is key when savers entrust their money to a pension fund to run in a climate-friendly way,” said Erlandsson.