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The TCFD recommends using carbon footprints as a metric for identifying climate risks, and this is why ATP also published the carbon footprint from its liquid portfolio and, for the first time this year, also from parts of its illiquid portfolio. |
In the reports of recent years, we have dealt with the TCFD’s various carbon footprint metrics in detail. As accounted for in this report, are of the opinion that statements of carbon footprints are useful from a company perspective, but for several reasons not meaningful as a management tool for a sophisticated and di... |
Therefore, in 2019 we started working on mapping our investments related to extraction of coal, oil and gas in order to better understand our exposure to the supply side of the fossil fuel industry across the portfolio. The mappings provide us with an insight, which we can benefit from in our investing and active owner... |
At the same time, we have found that the public has a particular interest in our fossil fuel investments and other investments that heavily impact the climate. With the mapping, we want to be as open as possible about our investments and our work to integrate climate in our investments. We also want to be open about th... |
In 2019, ATP published its first mapping of our investments in fossil fuel extraction activities across asset classes. This mapping was repeated in 2020, and we can now note that ATP has investments in the extraction of fossil fuels amounting to DKK 4.35bn. This is a decrease of 22 per cent in market value compared to ... |
It is particularly in our equity portfolio, where a decrease in oil and gas investments - these have decreased by 58 per cent since 2019, mainly as a result of in our equity portfolio, where of dedicated oil companies. Moreover, oil and gas investments have also decreased in our portfolio of corporate bonds and private... |
In our statement, we have not distinguished between oil and gas extraction, since most companies extract both oil and gas, and since gas is often extracted in connection with oil production. Moreover, when it comes to oil and gas, we have chosen to focus on the value chain from extraction to the end user – technically ... |
In mapping our investments in the oil and gas sector, we have learnt that, for listed companies in particular, excellent data are available that allow a relatively detailed statement of the investments, while for unlisted companies, it is harder to state precisely how a company’s activities are distributed along the va... |
EU’S TAXONOMY FOR SUSTAINABLE INVESTMENTS. |
Historically, ATP has been reticent about calculating our investments in green technologies. This is not because the data basis was lacking, but mainly because there are different perceptions of what should actually be categorised as ‘green’. With EU’s taxonomy for sustainable investments, it will now, however, be poss... |
INVESTMENTS RELATED TO THE EXTRACTION OF OIL, GAS AND COAL. |
Total market value (DKK bn) |
Number of companies oil & gas. |
Investments in oil & gas (DKKm) |
Development compared to 2019. |
Number of companies coal. |
Investments in coal (DKKm) |
Equities 97,898 13 305 -58 per cent 0 0. |
Corporate bonds 3,707 34 238 -23 per cent 0 0. |
Private Equity 67,301 112 2,342 -22 per cent 3 29. |
Infrastructure 39,807 4 1,339 -2 per cent 0 0. |
Listed equities: The companies in the table cover a range of companies with different exposure to oil and gas. The 13 companies are mainly companies operating in midstream and upstream and therefore their primary activities are not the extraction of oil and gas. Companies like Total, Eni and OMV do have this as their p... |
Corporate bonds: ATP has an externally managed portfolio of corporate bonds that invests in highyield bonds. ATP engages in an ongoing dialogue with the external manager on the investments in fossil fuels. |
Private equity funds and credit funds: Covers investments in funds that, based on a pre-agreed framework, invests in or lends money to a number of funds. ATP cannot select the investments itself once the agreement has been concluded. In 2019, ATP therefore chose to require that new funds should not include companies th... |
Infrastructure: This category covers ATP’s own direct investments in infrastructure and funds that invest in infrastructure projects and companies. The four companies in the table are all companies that operate with pipelines and other midstream infrastructure. |
Portfolio data from 1 October 2020 |
10 11. |
Climate Climate. |
Processes. |
The industrial sector’s CO2 emissions. |
As we with our mapping of investments in oil, gas and coal focused on the supply side in 2020 we chose to focus on the demand for fossil fuels. This was based on data that showed which industrial sectors had the most direct emissions of CO2. |
According to the IEA, 24 per cent of the global CO2 emissions in 2018 were direct emissions from industrials that either used fossil fuels or emitted CO2 when processing raw materials. |
From 2010 to 2018, the energy use of the industrials sector increased by 0.9 per cent per year, but in the future, the sectors consumption of energy needs to be limited in order to reach the targets of the Paris Agreement. According to the IEA, emissions from industrials need to fall by 1.2 per cent per year between no... |
It is particularly developing countries that have had growing demand for energy, while the demand from Europe and the United States has slightly decreased. The challenge is that in the future there will also be a lot demand for raw materials, particularly in India and China, while the SDS only leaves room for annual gr... |
According to the IEA, it is particularly the cement, iron, steel and petrochemical industries that have the most emissions as they use energy-intensive processes and, for example, the production of cement itself also emits CO2. |
In 2020, we have expandedWe have expanded our mapping to also cover an overview of ATP’s exposure to these industries across our portfolio. |
The petrochemical industry is a complex area, and therefore the mapping of this sector will be shown separately on the next page of the report. |
Our mapping has shown that ATP has investments of DKK 38 million in cement producers and DKK 314 million in steel and iron producers. |
Steel. |
Steel is indispensable for the construction sector as well as for the industrial sector. Steel is a relatively light construction material that can, among other things, result in less fuel being needed by vehicles and longer life expectancies for buildings. |
Steel is made by melting iron ore, limestone and scrap steel to reduce the carbon concentration. Coal accounts for about 3/4 of the energy consumption and this makes the process very CO2 intensive. Steel can be produced both cheaper and in a more environmentally friendly manner by using scrap steel. The supply of scrap... |
The demand for steel is expected to continue to rise, particularly due to the economic growth in regions such as India, ASEAN and Africa. The IEA points out that the climate challenges associated with the production of steel must be solved by focusing on using more scrap steel and innovative technologies such as CCUS (... |
The mapping has shown that ATP has investments in 17 companies in the steel and iron production sector worth DKK 314 million. This includes 10 companies with listed shares, two corporate bonds and five companies that are part of fund investments. In 2021, we will be looking at how we can use these results in our active... |
Cement. |
Cement is used throughout our infrastructure and buildings, and as living standards improve, it is expected that the demand for cement will also grow in the future. There is a climate-related challenge with this, however, as the making cement is a very CO2-intensive process. Cement mainly consists of limestone and clay... |
There are not many substitution products for cement, and the IEA predicts that the climate-related challenge needs to be solved using lower “clinkers-to-cement” ratios and innovate technologies such as CCUS. |
The cement industry is known for having expensive factories with life expectancies of around 30-40 years. There are thus significant transition risks associated with the industry if the producers do not manage to align their investment cycles with the innovation cycles. |
Our mapping has shown that ATP has investments of DKK 38 million in the production of cement via three companies. Therefore, we have decided to not expand our mapping for our active ownership in this context as the investments are very limited. As ATP is involved in the construction sector, we will remain focused on us... |
The industries that emit the most CO2 26 per cent 24 per cent. |
Cement. |
Iron and steel. |
Chemicals and petrochemicals. |
Aluminium. |
Pulp and paper. |
Other industry 4 per cent. |
Producers of cement, iron and steel, chemicals and petrochemicals generate the most CO2 emissions on a global level. Source: IEA, direct emissions from industry in 2018. |
14 per cent 2 per cent 30 per cent |
12 13. |
Climate Climate. |
Processes. |
The chemicals industry plays an important role in the green transition. |
Petrochemicals are the chemicals, which are produced from fossil fuels, and therefore they account for the vast majority of the sector’s energy consumption and emissions. The chemicals sector is the largest industrial consumer of fossil fuels. However, it is only the third-largest industrial emitter of direct CO2 emiss... |
Many of our everyday consumer products started out as fossil fuels - for example, plastics, fertiliser and cleaning products. In the years up until 2050, there will be an increasing growth in the demand for petrochemical products and this will also lead to increased demand for fossil fuels. Our mapping revealed that AT... |
The chemicals industry accounts for approximately 15 per cent of the primary demand for oil and 9 per cent of the primary demand for gas, and demand is expected to grow between now and 2050. Our mapping revealed that ATP has investments of DKK 2.7bn in the petrochemicals industry. |
Besides the high direct emissions from producing chemical products, these products are also more likely to pollute the environment in the later stages of their product lifecycles. End products such as fertiliser and plastics, cause a lot of damage to the environment and biodiversity if they are not managed and recycled... |
In ATP’s statement of investments in the chemicals sector, we have used three categories divided by their energy intensity: • Companies that produce primary chemicals • Companies that have petrochemical plants but who do not produce primary chemicals • Companies that do not have petrochemical plants but who operate in ... |
Several companies operate in a large part of the supply chain, and the complexity of the sector makes it difficult to map the cutoff points precisely. We have therefore chosen to err on the side of caution and overestimate the investments in the more energy-intensive parts of this sector. In our definition of the chemi... |
PETROCHEMICAL PLANTS. |
Petrochemical plants convert natural resources such as refined crude oil (naphta), natural gas and coal into chemical building blocks. The process typically involves breaking down long hydrocarbon chains (for example, from naphta) into smaller chains (for example, ethylene) in a distillation process that uses the diver... |
PRIMARY CHEMICALS. |
Primary chemicals include ammonia, methanol, ethylene, propylene, benzene, toluene and xylenes. The last five are called ‘high-value chemicals’ and are the primary building blocks of most petrochemical processes. The primary chemicals account for roughly 2/3 of the chemicals sector’s energy demand and thus also account... |
HOW FOSSIL FUELS ARE CONVERTED INTO EVERYDAY CONSUMER PRODUCTS. |
Step Process Products. |
Energy source. |
Fossil fuels are extracted from underground reservoirs. Their chemical composition consists of long hydrocarbon chains that contain a lot of energy. |
Oil, natural gas, coal. |
Raw materials ong hydrocarbon chains are broken down into smaller chains by using diverging boiling points. |
Naphta, propane, methane. |
Primary chemicals. |
The hydrocarbon chains are again broken down into smaller chains with different structures and properties. |
Ethylene, ammonia, methanol. |
Intermediary substances/ Polymer. |
Primary chemicals can be combined with other chemical building blocks using, for example, catalysts and the right kinds of temperatures and pressure. |
Polyester, PVC, solvents. |
End products. |
Chemical connections are used as input materials to add certain properties to the end products. |
Plastics, textiles, cosmetics, fertiliser. |
Very. |
CO2-intensive. |
Less. |
CO2-intensive. |
ATP’S INVESTMENTS IN THE PETROCHEMICAL INDUSTRY. |
Petrochemical companies (number) |
Investments in petrochemical companies (DKK million) |
Equities 37 2,119. |
Corporate bonds 12 72. |
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