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Activities. |
Carbon footprints are still a metric with some challenges. |
At ATP, we are continually working on getting better at measuring our work with ESG issues - both to show our progress and to learn more about ESG issues and their role in value creation. |
One of the metrics that we have worked with for a number of years is the carbon footprint of ATP’s investments. |
For companies, their CO2 emissions are a critical management tool that they can use to optimise their operations in a way that minimizes the environmental footprint. Therefore, at ATP has also for a number of years used the CO2 reporting figures in our dialogues with companies about climate issues, and ATP also measure... |
ATP is, however, careful about concluding that a reduction of a company’s carbon footprint is the same as an actual CO2 reduction in practice. |
And as an investor, looking at carbon footprints is associated with some challenges. The main challenge is that carbon footprints are also applied to dynamic portfolios. If a portfolio’s carbon footprint has decreased by 5 per cent in a year, it is impossible to say whether this is because of real reductions of CO2 emi... |
In addition, there are a number of other challenges: ● The data is still incomplete and does not cover all asset classes ● The distribution of emissions between shareholders and bond owners ● Double counting - an energy company’s scope 1 emissions may be another company’s scope 2 emissions ● The carbon footprint is a b... |
For the Nordic equities, which are mainly Danish companies, the carbon footprint has decreased from 2019 to 2020 as measured by all three methods. It is mainly the scope 1 emissions that have contributed to this decrease. However, Maersk, due to its business model and the size of ATP’s investment in it, is by far the l... |
For the international portfolio there has been a notable decrease in the carbon footprint measured by all three metrics. One explanation for this is that ATP has divested itself of 31 of the 50 companies with the highest carbon intensity in the global equities portfolio in 2019. At the same time, the carbon intensity a... |
Generally speaking, a comparison with the end of 2019 portfolio shows that the divested equities in the international portfolio have significantly higher carbon intensities and WACI than the equities that were added. In addition, both the carbon intensity and WACI have slightly decreased for the equities that have been... |
ATP’s corporate bonds have seen notable increases in both carbon footprints, carbon intensities and WACI. This is partially due to the fact that ATP’s external asset managers have invested in a number of industries and energy companies that have relatively heavy carbon footprints. There is a great deal of uncertainty a... |
Total carbon emissions Carbon Footprint Carbon Intensity WACI 2020 (tonnes CO2e) (tonnes. |
CO2e/DKKm) |
Development compared to 2019 (tonnes. |
CO2e/DKKm) |
Development compared to 2019 (tonnes. |
CO2e/DKKm) |
Development compared to 2019. |
Nordic equities 462,531 12.17 (-17%) 35.13 (-4%) 20.20 (-22%) |
Scope 1 429,086 11,29 (-16%) 32.59 (-3%) 17.55 (-24%) |
Scope 2 33,445 0.88 (-27%) 2.54 (-15%) 2.65 (-11%) |
International equities 556,830 7.65 (-44%) 12.56 (-51%) 16.34 (-57%) |
Scope 1 400,367 5.52 (-51%) 9.03 (-58%) 11.84 (-62%) |
Scope 2 156,176 2.15 (-6%) 3.52 (-18)% 4.49 (-33%) |
Corporate bonds 34,520 21.92 (73%) 26.95 (51%) 38.68 (49%) |
Scope 1 27,245 18.20 (92%) 21.27 (60%) 31.33 (62%) |
Scope 2 7,275 4.64 (45%) 5.68 (26%) 8.78 (32%) |
Explanations Total carbon emissions ar the emissions that correspond to ATP’s ownership stake. |
The carbon footprint statement is normalised based on the total size of the portfolio. |
The carbon intensity method focuses on the companies’ CO2 efficiency, as this is normalised based on the earnings of the portfolio companies. |
WACI shows the average CO2 intensity for all companies in the portfolio, weighted by their respective sizes relative to the portfolio. |
A portfolio’s carbon footprint is very much a reflection of which sectors one is exposed to. If one were to design a portfolio with a low carbon footprint, then the trick would mainly be in staying away from making investments in certain sectors. For example, an average utility company has a CO2 intensity that is over ... |
0 200 400 600 800 1000 1200. |
Tonnes CO2-equivalents per $1 million revenue. |
Utilities. |
Energy. |
Materials. |
Real Estate. |
Consumer Staples. |
Industrials. |
Consumer Discretionary. |
Heath Care. |
IT. |
Communication. |
Financials. |
WHAT COMPANIES HAVE THE HIGHEST CO2 EMISSIONS? |
22 23. |
Climate Climate. |
Activities. |
We must not forget the carbon footprint of the illiquid portfolio. |
As part of a new ESG initiative in 2020, we have started work on collecting better ESG data for our illiquid investments for the purposes of better being able to measure the effect of the ESG efforts. This has meant that ATP has systematically begun collecting emissions data for the individual portfolio companies. |
This new kind of ESG data work has therefore allowed ATP to measure its carbon footprint for parts of its illiquid investments (infrastructure and private equity). We support the TCFD’s recommendations and we want to be as transparent as possible when it comes to our carbon footprint, and therefore, in the future we wi... |
We have prioritised collecting data on the largest and newest investments. However, it is not all of the data that is collected that can be used to measure ATP’s carbon footprint. Some companies, for example, report on their emissions using different methods of measurement, while others report total emis- sions on a gr... |
The carbon footprint for ATP’s illiquid portfolio is somewhat lower than the carbon footprint of ATP’s equities portfolio. Measured by market value, the footprint covers approximately 40 per cent of ATP’s total illiquid investments (Private Equity and Infrastructure). However, the carbon footprint has been calculated o... |
When this is the case, as an investor you need to be careful about drawing conclusions. Companies that are not measured that year can potentially have either very positive or very negative impacts on a future measurement of ATP’s carbon footprint. We expect that in the coming years we will be able to report more compre... |
The three largest emitters of CO2 in ATP’s portfolio are infrastructure and private equity investments. |
Attero accounts for approximately 60 per cent of the portfolio’s total emissions, and measured by market value, it accounts for only approximately 1 per cent of the total portfolio. Attero operates several waste burning plants in the Netherlands where they, for example, use fossil fuels to break down and process waste ... |
HES International accounts for approximately 7 per cent of the portfolio’s total emissions. Measured by market value, the company represents less than 1 per cent of the total portfolio. HES is one of the largest diversified operators of port terminals in Europe. The company operates several (bulk) cargo terminals where... |
Redexis represents around 6 per cent of the portfolio’s total emissions. The company is one of ATP’s largest illiquid investments, and ATP owns 33.3 per cent of the company. Redexis is a Spanish energy and infrastructure company that operates a large network of pipelines to transmit and distribute natural gas to privat... |
OUR METHOD. |
We want to use similar methods of calculation to measure the carbon footprints of the illiquid portfolio and the liquid portfolio. However, unlike with liquid equities and corporate bonds, standardised market data such as, for example, enterprise value cannot be accessed and the enterprise value is thus based on intern... |
Carbon footprint of the illiquid portfolio. |
Companies (Number) |
Market value (DKKm) |
Total Carbon Emissions (tonnes CO2e) |
Carbon Footprint (tonnes CO2e/DKKm) |
Private Equity 23 4,839 17,646 3.65. |
Infrastructure 15 25,734 96,403 3.75. |
Total illiquid 38 30,574 114,048 3.73 |
AXA Group Carbon Footprint 2015 Disclosure. |
AXA IS WELL AWARE THAT CLIMATE CHANGE WILL HAVE SIGNIFICANT IMPACTS ON ITS INSURANCE BUSINESS AND MORE LARGELY ON THE RESILIENCE OF SOCIETIES WORLDWIDE. THE GROUP IS ALSO CONVINCED THAT CLIMATE CHANGE AND THE NECESSARY TRANSITION TO A LOW-CARBON ECONOMY REPRESENT NEW CHALLENGES AND OPPORTUNITIES FOR ITS INVESTMENT BUSI... |
MEASURING THE CARBON INTENSITY OF 75% OF AXA’S GENERAL ACCOUNT. |
Increasingly stringent carbon emissions standards and the potential need to reintegrate carbon-related costs, currently treated as a free externality, may place pressure on the profi tability of carbon- intensive industries, as well as spill over into other industries. This is why AXA undertook a “carbon footprinting” ... |
AXA GROUP FOOTPRINT BY ASSET CLASS. |
AXA GROUP CARBON INTENSITY 284 T CO2/$M OF REVENUE 55% Utilities 12% Basic materials 11% Industrial 10% Energy 6% Consumer non-cyclical 6% Others. |
Corporate Bonds & Equities 379 t CO2/$m of revenue 66% Europe 18% Asia 15% North-America 1% Others. |
Sovereign Debt 216 t CO2/$m of revenue. |
Beyond sectorial biases, AXA’s geographical footprint also strongly influences its carbon intensity. The diagram below provides some benchmarking information. |
AXA’s global carbon intensity – as measured on 75% of its General Account – is 284 t CO2/$m of revenue, broken down per asset class as follows: |
Sovereign Debt (measured on €199bn) – 216 t CO2/$m AXA’s geographic profi le and asset-liabilities management leads to a developed market bias which induces a low carbon intensity score, both in absolute and relative terms. |
Corporate Bonds and Equities (measured on €203bn) – 379 t CO2/$m (of which Corporate Bonds 387 t CO2/$m and Equities 322 t CO2/$m) In order to optimize their investments, insurance companies tend to overweight more “defensive” and resilient sectors (such as industrials), leading to higher carbon intensity levels. |
0 100 200 300 400 500. |
Equities. |
Corporate Bonds. |
Sovereign Debt. |
Total. |
AXA Group 0 100 200 300 400 500 on €402bn o/w €199bn o/w €184bn o/w €19bn t CO2/$m of revenue |
CARBON FOOTPRINTING: CONCLUSIONS. |
BEYOND FOOTPRINTING. |
This footprinting work highlights our portfolio’s largest carbon emitters, which may be an interesting “carbon asset risk” proxy. It is a potentially useful tool to understand high carbon holdings, revealing that while broad asset-class level figures do not provide useful insights, a breakdown into sub-sectors (not dis... |
Carbon data is a snapshot of current emissions, but is not forward-looking. As such, it appears insuffi cient to clearly identify players across industries that are contributing to the low carbon economy. It highlights today’s carbon emitters, but not tomorrow’s low carbon solutions providers. These challenges with car... |
Coal divestment +2°C is considered to be the maximum temperature rise before triggering significant risks to society, which requires severely limiting CO2 emissions, which in turn translates into a need to extract and burn only 1/3 of existing fossil fuel reserves by 2050. Enforcing this carbon constraint would result ... |
Green investments We also commit to tripling our green investments aiming to reach over €3bn by 2020 for our General Accounts, originating coming principally from investments in private equity, renewable energy infrastructures, and green bonds. |
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