MP divests from ten oil majors
MP wants to aid the green transition, and secure its members’ long-term investment returns. As a result, MP has decided to divest from all listed equities in Royal Dutch Shell, ExxonMobil and eight other of the world’s largest oil companies. The divestment is based on MP’s assessment that the companies’ long-term business models are incompatible with the goals of the Paris Agreement to limit global warming to well below 2 degrees. It total, MP divests equity holdings worth EUR 86 million.
Since 2016, MP has officially supported the goals of the Paris Agreement to limit global warming to well below 2 degrees. In 2018, MP’s Board of Directors decided to divest from listed shares in coal, tar sands and oil activities by the end of 2020 at the latest. Fossil fuel companies that are implementing strategies and designing their long-term business models to support the goals of the Paris Agreement are exempt from the divestment decision.
“MP’s ambition is to be recognized as the most responsible pension fund in Denmark and we wish to contribute to the green transition. We have based our divestment decision on an assessment of future investment returns of the sector. We do not find that this sector can deliver a return on par with the rest of the market in the coming years. The demand for fossil fuels, including oil, will decrease as the green transition accelerates,” says Anders Schelde, Chief Investment Officer at MP Pension.
MP divested from coal and tar sands in 2018, and since then MP has analyzed and assessed whether the largest oil companies have adapted their long-term business models and strategies to the goals of the Paris Agreement.
“We will assess more than 1000 companies before the end of 2020. That is why we have decided to focus on ten of the largest oil companies in the world. The total market capitalization of these ten companies exceeds EUR 1,200 billion. MP’s shareholding in the ten companies amounts to EUR 86 million, corresponding to two thirds of MP’s equity investments in oil”, says Anders Schelde.
MP divests from listed shares in the following companies:
- Royal Dutch Shell
Assessing the transition plans of oil majors
MP has collaborated with a number of organizations to collect data on the transition plans of the ten companies. Based on this information, MP finds:
- Four companies (BP, Royal Dutch Shell, Total and Equinor) have looked at possible future climate scenarios and are taking steps towards transitioning towards a low-carbon economy.
- Six companies (ExxonMobil, Chevron, PetroChina, Rosneft, Sinopec and Petrobras) have no or very limited initiatives to support the transition to a low-carbon economy.
- The companies continue to oppose climate regulation, despite publicly expressed support for the Paris Agreement.
“Based on the data available, it is MP’s assessment that the ten companies are not compatible with the goals of the Paris Agreement - and will not be so by the end of 2020. We have considered whether we should wait to sell our shares until 2020, as positive turn of events and stronger commitments might still emerge. However, we have decided to draw a line in the sand, as we do not believe that we as investors can further influence these companies before the end of 2020”, says Anders Schelde.
Although MP has decided to sell its shares, it is MP’s sincere wish to be able to invest in shares in the companies again.
“We hope that the ten companies will take the green transition much more seriously and will take on a greater responsibility to align their business plans with the goals of the Paris Agreement. Should they do so, we would very much like to invest in the same companies once again – but it requires a significant change in all ten companies”, says Anders Schelde.
MP has analyzed and evaluated each of the ten companies individually. MP has assessed the companies’ business and climate change strategies with data from Carbon Tracker, while the companies’ lobby activities have been assessed with data from InfluenceMap. KR Foundation has co-financed the data and analyses from Carbon Tracker.
The exclusion rationales for each of the ten companies are available here (in Danish only): https://mppension.dk/ansvarlighed/sadan-arbejder-vi/vi-ekskluderer/eksklusionslister/
Corporate bonds in fossil fuel companies
At present, MP sells shares worth EUR 86 million in oil companies, and more oil companies will be assessed and possibly sold before the end of 2020. The Board of Directors of MP had planned to analyze the consequences of also divesting from corporate bonds in fossil fuel companies after 2020. However, at MP’s general meeting in the spring of 2019, a majority of scheme members called upon the Board of Directors to also divest from corporate bonds issued by fossil fuel companies. As a result, MP is in the process of preparing an impact assessment of such potential next step - similar to the impact assessment undertaken prior to the decision to divest from listed equities in fossil fuel companies. MP currently holds corporate bonds in two of the ten fossil fuels companies analyzed (Rosneft and Petrobras) worth EUR 22.5 million.
Position paper on fossil fuel investments
In 2018, MP’s Board of Directors published a position paper detailing the decision to divest from listed equities in coal, tar sands and oil activities. The position paper is available here (in Danish only): https://mppension.dk/globalassets/pdfer/standpunkter/standpunkt-fossil.pdf
MP’s Policy for Responsible Investments
Since 2009, MP Pension has had a Policy for Responsible Investments. The policy is reviewed at least once a year and includes, among other things, MP’s climate allocation of 5% of the total assets under management. The climate allocation is dedicated to investments that promote the transition to a low-carbon economy.