Danish labor market pension fund PenSam wants a much greener portfolio and is thus setting a specific climate target: 10 percent of the actively managed Fleksion investment portfolio must support climate change mitigation efforts by 2025, roughly corresponding to DKK 8bn (EUR 2.4bn) in sustainable investments.
The present figure is 2 percent and consists of holdings in wind farms, green bonds and other assets addressing climate change and global environment.
"We have decided to set a 10 percent target, which is an expression of the opportunities we see in this area while looking at our portfolio. Relative to our current position, this is a somewhat ambitious, yet still feasible goal based on the possibilities we see in different parts of the portfolio," says PenSam Chief Investment Officer Claus Jørgensen to AMWatch's sister media, FinansWatch.
Partnerships will help PenSam achieve its goal
The organization has known about the goal internally for a few months, and PenSam also has taken a head start before making the goal public. This took place by investing in a solar farm in California as well as a project in Sweden consisting of 84 wind turbines – both projects also involve Danish pension provider PKA's investment company, AIP, which specializes in alternative investments.
This partnership model will help PenSam achieve its goal.
"However, other areas will require some adjustments enabling these investments. That's what we've done in the case of solar and wind farms, where have set up a structure allowing us to enter these investments," Jørgensen says.
Thus, PenSam does not plan to recruit new competent personnel familiar with the business area for its own investment division.
"Much of this can be accomplished by cooperating with external parties. For instance, it would never make sense for us to build up an organization capable of the same things AIP can do," the CIO says.
All concepts become greener
Beyond these specific infrastructure investments, PenSam has also incorporated the Task Force on Climate-related Financial Disclosures' recommendations concerning risk assessment for investments related to climate change. There is also an element of risk management behind PenSam's climate goal.
"It will have to make a positive impact on returns, because we wouldn't do it otherwise. The green energy transition bears certain risks, but it definitely also provides opportunities. This is best exemplified in infrastructure assets substituting fossil fuels with renewable energy. This a part of what we are trying to utilize with these two current investments," Jørgensen says.
As mentioned before, the climate goal will also apply to the Flexsion concept, which is the only PenSam product still raising capital. This, however, is not to say that the company’s other concept portfolios will not contain climate-related assets.
"We will also make this type of investment with the other concepts, but all new capital is entering Flexsion. That's why it makes the most sense to announce the direction it is heading. But these investments will also enter other ongoing concepts," Jørgensen tells.
English Edit: Daniel Frank Christensen