text stringlengths 0 7.73k |
|---|
Private Equity & Credit Funds 23 463. |
Infrastructure 0 0 |
14 15. |
Climate Climate. |
Processes. |
Stricter requirements for electricity production. |
As a long-term investor, it is important for us to take into account climate issues in our investment decisions so that our portfolio is well-equipped to withstand the financial impacts of climate change. |
Therefore, in 2020 we revisited our approach to investing in utility companies. This has resulted in a number of new initiatives that are to ensure that ATP’s global equities portfolio is robustly equipped to deal with climate change. |
Therefore, ATP has four requirements for utility companies: 1. Preference for companies focusing on the green transition When selecting equities to invest in, we have integrated a new data point that pushes our equity selection process towards picking the companies that have the highest ambitions for the green transiti... |
2. No to new coal plants In 2020, ATP has chosen to exclude utility companies that expand or develop new coal plants from our investment universe. In order to meet the targets of the Paris Agreement, the world must reduce the coal consumption significantly and therefore, ATP believes that there are both financial and c... |
3. No to companies with a large of exposure to coal ATP is maintaining its current policy of saying ‘No thank you’ to companies that generate more than 50 per cent of their electricity from coal plants. If here in 2020 a company has such a large part of their assets tied up in coal, we believe that there is a significa... |
4. Dialogue with companies about future CO2 intensity If companies have a very CO2-intensive electricity production that indicates that the company is basing its production on fossil fuels, we will enter into a dialogue with the companies and ask to see specific investment plans leading up to 2030 so that we can calcul... |
If we wanted to just ‘look’ greener at first glance, we would invest in companies that are already very green or stop investing in utility companies entirely. This would of course reduce the climate footprint from our equity investments significantly, but it would not change much in terms of reducing global emissions. ... |
Christian Kjær, Head of Liquid Markets. |
HOW WE DESIGNED OUR NEW CLIMATE MODEL. |
ATP’s preference for utility companies that focus on the green transition has been integrated into the selection of equities process on the basis of an analysis of two competing strategies for climate integration. |
Strategies. |
The two strategies are: |
Strategy 1: Select the companies that have the lowest carbon footprints at the time of selecting equities to invest in. |
Strategy 2: Select the companies in the utility sector that have the most ambitious management teams in terms of the green transition. |
Analysis. |
We have evaluated the strategies based on two parameters: |
Parameter 1: The return-related effect of integrating climate issues (compared to a portfolio without integrated climate issues). |
Parameter 2: The companies’ performance when it comes to achieving CO2 reductions in the three years following their selection. |
Result. |
The results of the analysis were clear: |
Parameter 1: The implementation of strategy 1 had a negative projected impact on returns, while strategy 2 had a neutral/moderately positive impact on projected returns. |
Parameter 2: The companies selected based on strategy 2 managed to reduce their CO2 emissions significantly more over the course of three years than those selected via strategy 1. |
Conclusion. |
On the basis of the results from the analysis, we chose to go with strategy 2 for our global equities portfolio. |
16 17. |
Climate Climate. |
Processes. |
Green bonds for DKK 29bn. |
As one of Europe’s largest holders of bonds, we want to use our influence to develop the market for sustainable bonds. When in 2017 we decided to enter the market for green bonds, we also developed our own approach aimed at ensuring that the green bonds we invest in comply with our investment and ESG requirements. |
The market for green bonds has grown significantly in the past few years and has now reached a level of maturity where it is more about managing the market, for example in the form of regulatory initiatives. |
ATP has been increasing its investments in green bonds on an ongoing basis, and at the end of 2020 we had almost DKK 30bn invested in green bonds. |
At ATP, our ESG requirements also need to be met for our investments in green bonds, and we have therefore developed our own standard for the issuers of such bonds that exceeds the recommendations of the Green Bonds Principles. We require transparency of what projects the bonds help to finance and we also have requirem... |
Besides having increased our investments in 2020, we have also continued to develop our ESG standards. In 2020, ATP developed two metrics to evaluate our green bonds as there are differences between state issuers and non-state issuers. |
When looking at the regular green bonds, we have strict requirements for transparency. We therefore focus on how much information we as investors can get about how the proceeds from the bond issue are stored and which projects receive financing. We believe that it is best if we can see exactly which projects our bonds ... |
This, however, is not possible when we look at state issuers of bonds for two key reasons. Firstly, states cannot track the proceeds in the same way as other issuers, as - from a purely legal perspective - they are not allowed to have a special account for money raised via green bonds. Secondly, states also finance gre... |
States are important actors in the market for green bonds but we cannot compare state-issued green bonds with other issuers of green bonds on a 1:1 basis. Instead, we have developed specific criteria for states that allow us to ensure that we pick the best possible state-issued green bonds. |
One of the factors that will have a major influence on the market for green bonds in the future is the EU’s Taxonomy for Sustainable Activities and EU’s standard for green bonds, which is partially based on this taxonomy. We have therefore taken part in the consultation process for the new standard and we have told of ... |
In the last few years, we have been impacting the market for green bonds, which has gone through a massive development process. We will continue doing so in 2021, with ATP as an active participant in that development and with a focus on solid reporting and transparency so that the market for sustainable financing conti... |
Lars Dreier, Director – Fixed Income. |
What we investigate Development banks Government bonds. |
The framework. |
Does the bond issuer describe its strategy and how the projects fit into this strategy? |
Does the bond issuer describe how the green bonds contribute to national targets as per the Paris Agreement? |
Selecting projects. |
Does the bond issuer describe the process for selecting projects? |
Does the bond issuer describe what specific requirements there are for the project in the selection process? |
Does the bond issuer describe what types of public expenses can be financed via the bond issue? |
Has there been taken precautions to avoid double counting of green projects? (For example: projects in state-owned companies that issue their own green bonds) |
Managing the proceeds. |
Does the bond issuer track the proceeds until full allocation has been achieved? |
When are the proceeds expected to be fully allocated to projects? |
Does the bond issuer describe what budget periods are financed by the bond issue? |
Reporting. |
Does the bond issuer report on the project level? |
Does the bond issuer report on what proportion of the proceeds have gone to either projects or state expenses? (For example, subsidies and tax incentives) 16 18 20 22 24 26 28 30 01-01-2020 01-02-2020 01-03-2020 01-04-2020 01-05-2020 01-06-2020 01-07-2020 01-08-2020 01-09-2020 01-10-2020 01-11-2020 01-12-2020 01-01-202... |
Mia. kr. |
16 18 20 22 24 26 28 30. |
THE DEVELOPMENT IN ATP’S GREEN BONDS IN 2020. |
STRICT REQUIREMENTS FOR CREDITWORTHINESS. |
ATP invests in green bonds with a creditworthiness corresponding to the bonds that ATP is already investing in. This means that it must be government bonds or bonds with similar credit characteristics. We do so since the green bonds are part of our hedging portfolio and thus also our long-term pension liabilities. We t... |
18 19. |
Climate Climate. |
Activities. |
Saying farewell to a number of oil companies. |
In 2019, ATP made an analysis of how CO2 intensive oil companies were in their oil extraction processes, and this resulted in a number of oil companies, including tar sands producers, being divested due to investment risks. In 2020, we have refined our approach so that ATP now has its own rating system for oil and gas ... |
Specifically, this means that a number of companies have been excluded from ATP’s investment universe, including ExxonMobil, Chevron and ConocoPhillips plus a number of other company who operate in the shale oil industry. Even though ATP has not previously invested in these companies, they are now completely cut off fr... |
With ATP’s new investment approach towards oil companies, companies such as ExxonMobil, Chevron and ConocoPhillips are now no longer part of ATP’s investment universe. |
The rating is based on two factors that together add up to the final rating that determines whether certain companies can remain part of ATP’s investment universe. These two factors cover the two parts of oil production that have the heaviest carbon footprint when producing oil. |
The first factor is the companies’ upstream portfolio - in other words, the oil and gas that the companies extract and plan to extract. For example, there are certain kinds of oil that have a lower carbon footprint than others, but the proportion og natural gas extracted compared to oil is also a factor. The rating tak... |
The other factor is the use of flaring - the burning of natural gas when extracting oil. Here we have chosen to look at whether the companies report on flaring and whether they have committed themselves to reduce the use of flaring in their extraction processes by signing up for the World Bank’s Zero Routine Flaring In... |
It is also important to analyse how strong that obligation is. As the ownership of oil fields is often split between a number of companies and only one company takes care of the operations, the analysis also looks at how many oil fields a company has ownership stakes in but is not itself operating - and where the opera... |
ZERO ROUTINE FLARING BY 2030 INITIATIVE. |
The Zero Routine Flaring by 2030 Initiative has been created by the World Bank to oblige governments and oil companies to limit their use of routine burning of gas when extracting oil. Denmark is one of the 32 governments that has endorsed the initiative. |
Hess Corp Apache Corp Murphy Oil Corpw ConocoPhillips EQT Corp Range Resources Corp Ecopetrol SA Chevron Corp Exxon Mobil Corp. |
In 2019, ATP removed companies whose primary business activities involved tar sands from the investment universe. |
China National Petroleum Corp Pioneer Natural Resources Co Continental Resources Inc ParsleyEnergy Inc Diamondback Energy Inc ComstockResources Inc CimarexEnergy Co PDC Energy Inc Chesapeake Energy Corp. |
CallonPetroleum Co EOG Resources Inc Noble Energy Inc Marathon Oil Corp ConchoResources Inc WPX Energy Inc GulfportEnergy Corp. |
On the basis of the new rating system, ATP has removed the following companies from its investment universe: 1. Upstream portfolio. |
The companies’ portfolios are analysed on the basis of: • How much oil does the company extract relative to natural gas? • How much of the company’s business activities are exploration and production? • What type of oil does the company actually extract and how does their pipeline look like? 2. Flaring. |
The companies’ flaring activities and how these are managed are analysed. • Does the company report on how much natural gas it burns/emits in its oil production processes? • Is the company part of relevant initiatives? • Has the company sufficiently committed itself to reduce flaring activities? |
ATP Rating. |
On the basis of the two underlying scores, the companies are awarded a composite score (the ATP Rating). |
The scores will indicate which companies ATP has identified the most specific issues with. The lower the rating, the less issues have been identified. |
HOW ATP’S OIL RATING PROCESS WORKS |
20 21. |
Climate Climate. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.