$20 Billion Pension Fund Divests From Oil Companies For Contributing To Climate Change
A pension fund with $20 billion in holdings says it will sell its stake in major oil companies worldwide because their business models are in direct conflict with the goals set forth in the Paris climate agreement.
According to EcoWatch, MP Pension, which is headquartered in Denmark, is immediately divesting from its investments in 10 of the world’s largest oil producers, including BP, Chevron, ExxonMobil, PetroChina, Rosneft, and Royal Dutch Shell.
The total amount of the stocks being dumped by MP is nearly $100 million, which is 0.5 percent of the fund’s overall stock portfolio.
Anders Schelde, the fund’s chief investment officer, explained the reason for the move:
“We found that none of the oil majors has a business model that is compatible with the goals of Paris Agreement and thus we decided to sell them all. We put them all on our blacklist, our exclusion list.”
MP Pension divestment is the latest that has come from asset managers around the globe who are reassessing their responsibility as the world continues to suffer from the effects of climate change as a result of burning fossil fuels such as oil, natural gas, and coal. The Paris agreement sets a goal of limiting the average global temperature rise to 2 degrees Celsius above the preindustrial era.
In March, Norway made news with an announcement that they would no longer make investments in oil and gas exploration companies:
“Norway’s $1 trillion asset manager — the world’s biggest sovereign fund — said it would shed its stakes in oil and gas explorers and producers. But the fund fell short of expectations that it would dump all its oil and gas investments for good. It said it would remain invested in Big Oil companies such as Shell, BP, Total and ExxonMobil, in which it owns significant stakes.”
However, unlike MP Pension, Norway said it was divesting solely on financial considerations and not climate change.
MP Pension’s Schelde also noted that part of its calculation was based on the overall return on investment:
“Our first and foremost concern is future investment returns. The companies that we are divesting in have delivered poor returns in the past 4-5 years and we feel for the next 10-20 years they would continue to be poor.”
Unfortunately, MP will not completely shun all fossil fuel investments, with Schelde explaining:
“We are not ditching fossil fuels entirely. For example, we do not exclude companies that focus on gas because we feel gas is an intermediary fuel that we will be needing to replace for instance coal, which has a carbon intensity roughly double that of gas.
“We realize that fossil fuels will remain part of the energy mix for many years, even 100 years. But we need to bring down the amount of carbon that we emit in the atmosphere.”
SPG Global reports that a total of 1,000 funds with total portfolio holdings of $8 trillion have committed to divesting from some or all fossil fuel companies.
What remains to be seen is whether or not these financial divestments will cause fossil fuel producers to switch to areas such as renewable sources of power as they move forward or if they will continue to operate as normal and contribute to the rise in global temperatures.
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