Denmark’s Danica has adopted a stricter fossil fuel policy in its equity and bond investments, which will be applied to its Danica Balance, Danica Tidspension and Danica Traditionel pension offerings.

The new approach covers a large part of the fossil fuel value chain and will be based on whether Danica assesses a company has “realistic plans” to transition away from fossil fuels.

It applies to companies where more than five per cent of revenue is derived from exploration, production, distribution, refining, transport, storage, energy production, and equipment and services related to fossil fuels such as coal, oil, gas or tar sands.

Danica investment director, Poul Kobberup, said: "We continuously focus on optimising our customers' pension investments to ensure the best possible return. How companies act in relation to the green transition of their business plays a significant role in whether we consider them an attractive investment case.

“Specifically, we will divest fossil companies and focus investments in far fewer fossil companies that we believe have realistic plans to support the transition to a more sustainable society.”

He said the change of strategy also reflects “customers’ wishes” in terms of how to support the transition of the energy system, whilst ensuring a good return on pension savings.

“The energy sector is very complex and requires a nuanced and balanced approach that takes into account societal needs and challenges as well as developments in the energy system. We take this into account in the selection of companies as part of safeguarding our customers' financial interests,” he said.

Currently, 80 per cent of the world’s energy supply still comes from fossil fuels. The International Energy Agency estimates that fossil fuels will continue to be part of the global energy supply until 2050, while a gradual transition to more renewable forms of energy is taking place.

On this, Kobberup said: "We focus on companies that future-proof their business as part of addressing the energy needs and challenges of the coming decades. Companies are not static and change, which is why we continuously assess their transition plans, and this dynamic will be reflected in our selection and deselection of companies.”

Therefore, Danica assesses companies’ transition plans based on its Net Zero Pathway Framework model, which is primarily based on data and methodology from the Transition Pathway Initiative.

Danica said that due to investment and regulatory reasons, it cannot disclose which companies will be selected or deselected on an ongoing basis. After the customisation is complete, an updated restriction list will be published.

The majority of the implementation of the new approach is expected to be completed by autumn this year.

Danica Balance Responsible Choice will continue to have no investments in companies where more than five per cent of the turnover comes from various activities related to fossil fuels.

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