Matter and AP Pension launch new partnership on sustainable pension savings.

Pension companies are boosting the oil industry’s growth and working against climate goals

If we are to meet the 2-degree target set forth in the Paris Agreement, 80% of all known carbon reserves need to stay underground. But carbon-intensive companies seem to continue business as usual and pension companies still invest heavily in them supporting their growth. This means that the average Danish pension customer still owns 32 tons of carbon reserves per €20,000 invested.

Let’s start with a quote:

The company is valued on producible reserves that we can produce in the next 12 or 13 years. We should certainly be able to produce those under any climate outcome. Even if global temperatures can only rise by 2 degrees.

That’s the words of Royal Dutch Shell CEO, Ben van Beurden, when asked whether Shell intends to pump out all the fossil fuel reserves listed on its balance sheet shortly after the Paris Agreement was agreed upon.

The 2-degree target is a cornerstone in the Paris Agreement, which was agreed upon by almost 200 countries, and is about limiting temperature increases to 2 degrees and weaning the world economy off fossil fuel.

But research shows that to meet the 2-degree target, globally: …only 20% of the total reserves can be used to stay below 2°C.

The total carbon potential of the Earth’s known fossil fuel reserves comes to 2795 Gt CO2 . 65% of this is from coal, with oil providing 22% and gas 13%. This means that governments and global markets are currently treating as assets, reserves equivalent to nearly 5 times the carbon budget for the next 40 years. (Carbon Tracker Initiative Report)

Shell’s commitment to the Paris Agreement is thus clearly inconsistent with their plan to extract all the resources known by the company today. And unfortunately, stock markets are currently not responding to this: the valuations of leading carbon extractors are still widely based on scenarios where the companies extract the vast majority of known reserves.

This inconsistency is reaffirmed by reports by the shareholder activist organisation, Share Action, who reported that both Shell and BP are in fact planning for temperature rises as much as 5°C by 2050, which several climate scientists say would be catastrophic for the planet.

At Matter, we’ve done the math and looked at how the debate relates to the average Danish pension customer. And to be honest, we were actually a bit surprised about the magnitude of the number: the average Danish pension customer owns 32 tons of carbon reserves for each €20,000 invested. The reserves are owned through shares in companies such as Shell and BP.

Our policy on the topic is clear: a Matter pension customer will own zero carbon reserves. We’ve achieved this through rigorous screening of our portfolio investments together with our Danish partner, Skandia.

We believe that pension companies all over the world can create the change needed to meet the ambitious climate goals. It’s about time that the pension industry take responsibility and contribute more actively to the green transition. In the end, we don’t need to extract all that oil, gas and coal if we invest more heavily in renewable energy and development of sustainable solutions that can replace the dominance of fossil fuels! That’s why we do what we do at Matter.

If you want to read more about the debate between carbon extraction and the 2-degree, we’d recommend reading McGlade and Elkins original study or ShareAction’s report on Shell’s role.

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