Denmark's Danica has completed the roll-out of its strengthened investment policy, adding 1,730 more fossil fuel companies to its exclusion list.

This is a significant increase compared to 2024; the provider now excludes all firms without credible climate transition plans aligned with the Paris Agreement.

Despite this, the overall level of exposure to fossil fuel companies in the portfolio remains unchanged from last year, as Danica continues to invest in businesses within the sector that meet its new requirements.

Danica chief investment officer, Poul Kobberup, explained that the approach is designed to focus capital on the most adaptable fossil fuel companies - those with strong climate governance and viable plans to achieve carbon neutrality.

“These companies not only contribute to the green transition, but also have the potential to deliver competitive, risk-adjusted returns,” he said, adding that customer appetite for investing in the transformation of the energy system was a key driver behind the change.

Kobberup emphasised that the policy takes into account the complexity of the energy sector, combining stricter climate criteria with the need to safeguard clients’ financial interests.

“The portfolio remains well-diversified and robust, but we are now more selective within the fossil sector,” he noted.

“We will continue to hold investments in companies that meet our standards, and these will be monitored closely.

"Firms that fall short will be excluded, while those that improve their climate plans may be reconsidered,” added Kobberup.

The stricter requirements build on earlier measures introduced at the start of 2025, when Danica applied more stringent fossil fuel criteria across a range of its pension products.

Danica’s move comes amid growing divergence across European pension funds’ climate strategies.

As reported recently by European Pensions, three major French pension funds continue to back fossil fuel expansion through their investments and voting, in contrast to the Paris-aligned path.

Academic research has also highlighted that, while European pension funds are increasingly adopting environmental, social, and governance (ESG) policies such as net-zero targets and fossil fuel exclusions, their overall ambition remains insufficient to deliver a complete energy transition.

With this in mind, Norwegian pension company KLP called for alignment on net zero, suggesting that coordination around a single recognised industry standard will be key to clarifying the path forward.

However, research from Isio painted a more optimistic picture, finding that almost all (97 per cent) asset managers have an established ESG policy and dedicated sustainability teams in place, despite recent high-profile withdrawals from climate initiatives and concerns around fund labelling.

Looking ahead, the EU’s sustainable finance disclosure regulation (SFDR) aims to standardise how financial market participants disclose ESG factors in investments, although firms are divided on its potential impact.

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