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

Where does your money sleep at night? See the number of harmful companies in an average pension portfolio

What, exactly, is your pension invested in? You probably cannot answer this question – and maybe you haven’t thought a lot about it, because your pension company doesn’t tell you. Maybe there’s a reason for this. We looked into exactly what types of company an average Danish pension portfolio consists of – and the results aren’t pretty.  

We screened the portfolios of 13 pension funds in Denmark to find out exactly how many fossil fuel, tobacco, and weapons companies, as well as companies with questionable human rights and corruption track records, that actually receive investments from Danish pension companies. This blog is the introduction to our series exploring the harmful industries we at Matter actively avoid and the practices we want to see changed.

There's a sustainability juxtaposition that currently exists in Denmark. Sustainability is nothing new here, with Denmark being hailed as an example in sustainability in areas ranging from bicycle friendly cities, to being well on its way goal to be carbon-neutral by 2025, with wind turbines delivering power equivalent to 43.6 percent of Denmark’s electricity consumption in 2017. Issues of sustainability dominate governmental and societal discourse, and in many areas, Denmark can indeed be seen to be extremely progressive in the field of sustainable growth

However, one industry which the sustainability agenda is yet to meaningfully reach in Denmark is the pension industry. The pension industry still invest large sums of savings in harmful companies. As an example, 12 of the largest pension companies in Denmark had in 2012 invested over two million Danish Kroner in the coal industry alone. This investment generates a yearly emission of 484,000 tons of CO2!

In 2018, WWF released a report that focused on the climate efforts of 17 Danish pension companies. The report showed that the pension companies – to some degree – have started to consider climate to a higher degree, but there is still a long way to go. In the report, it’s showed that none of the 17 pension companies have set determined goals of divesting in fossil fuel companies.

We have analysed the composition of an average pension portfolio based on a screening of 13 of the largest Danish pension company portfolios to show exactly how many harmful companies, you as a pension customer are passively investing in through your pension.

It’s not possible to make a perfect analysis of the entire Danish pension market, as it is far from all pension companies who publish their portfolios. But we gathered the lists, we could find and screened them. You can see the results listed below.

How the sausage gets made

We have screened 13 of the biggest pension funds in Denmark, with an average portfolio of 2346 companies. The results show that they are, using weighted averages, invested in....

It’s clear that the Danish pension companies still invest in way too many controversial and harmful companies. With Matter, customers will avoid investments in all the above companies. We screen all investments to make sure that we exclude all controversial and harmful companies. Read more about our investment approach here.

Why are pension companies still investing your money in harmful companies?

In part, it has been caused by convenience. You continue to save into your pension, regardless of whether you pay attention to the details or not. This has led to a level of complacency that means pension providers haven’t needed to be transparent or offer options for customers to examine where their money sleeps at night. One of the sayings in the pension sector is “don’t wake the sleeping customer” – don’t alarm customers to what is actually going on behind the scene.

Another reason is also an antiquated investment logic. The current approach to portfolio and investment theory employed by a range of investors, emerged more than 60 years ago, in 1952, and still guides investment decisions today. Modern portfolio theory states that the investment universe should be kept as broad as possible– with little regard for ethical considerations. Unfortunately, the same logic dominates a lot of investment decisions today.

Luckily, more leading economists from around the world have started warning against investing too heavily in fossil fuels. As early as 2014, Mark Carney, governor of the Bank of England, called for investors to consider the long-term impact of investing in the oil, coal and gas industry. The hypothesis is that fossil fuel assets might lose a great deal of their value, because the price of the oil, gas and coal companies’ shares are calculated under the assumption that all fossil fuel reserves will be consumed. But will they? The renewable energy industry is growing rapidly threating oil, coal and gas and international agreements are putting pressure and attention on the catastrophic consequences of the extraction and use of all carbon reserves.

However, these warnings against investing in fossil fuel companies don’t seem to have affected the Danish pension industry’s investment strategies too much – yet.

You should be able to see exactly where your money is invested

When you look at our screening, it’s not surprising that a Dane owns 4-5 times more fossil fuel in stocks than what the energy companies can extract and emit, if we are to avoid catastrophic climate change. At Matter, it has become our mission to prove that it is possible to create pension portfolios with no investments in fossil fuel companies and other harmful industries for a more sustainable future.

At Matter, we work with Skandia to offer sustainable pensions. This means no investments in fossil fuels, weapons, tobacco, companies with poor human rights records and companies involved with corruption. We also make the full list of companies in your portfolio available for you so that you can see exactly what your pension is invested in.

Over this blog series, we will be diving into the controversial and harmful industries such as fossil fuel and tobacco, to explain why it’s a problem that current pension providers investing in them, and why we at Matter avoid it.

Stay tuned over the coming weeks for more!

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