Exclusion of Companies and Countries

PFA's approach to excluding companies

PFA’s investments should ensure financial security for our customers. Therefore, PFA generally does not wish to limit its investment universe by exclusions. Via active ownership, PFA attempts to influence the companies that we assess should change behaviour because they are acting in violation of our Policy for Responsible Investments and Active Ownership or other PFA policies. 

If PFA assesses that there is no basis for an active ownership dialogue, the group executive management may choose to exclude a company. Similarly, they may choose to exclude a company if its behaviour is fundamentally contrary to PFA’s values. 

Finally, PFA excludes companies according to the criteria below related to climate, weapons and international standards. Companies that fail to meet the criteria are not part of our investment universe. 

 

  

Climate

PFA excludes companies that violate certain quantitative limits for climate-related high-risk activities. The quantitative limits are an expression of there generally not being the right balance between risk-adjusted returns and climate risks. 

  • Companies whose revenue from oil extraction from tar sands or thermal coal exceeds 5 % of the company’s total revenue*
  • Companies with more than 5 % revenue from coal-based energy production*
  • Companies expanding in coal mining or coal power*
  • For corporate bonds, companies that are oil, gas and coal producers as measured by Bloomberg Fixed Income Classification System (BCLASS) – Energy are excluded.

In addition, PFA has excluded all oil and gas producers** except TotalEnergies. PFA is co-lead in the dialogue with TotalEnergies through the investor initiative Climate Action 100+ and is thereby persistently working to ensure that the company moves in a greener direction.

*Breaches of these thresholds for climate-related high-risk activities are disregarded if the investment product is a green bond. 
**Oil and gas producers are excluded by Bloomberg Fixed Income Classification System (BCLASS) – Energy for corporate bonds and MSCI’s Global Industry Classification Standard (GICS) for the Oil, Gas & Consumable Fuels industry for equities. 

Weapons

Based on international conventions and guidelines, PFA also does not want to invest in companies that produce controversial weapons such as cluster bombs and anti-personnel land mines. PFA systematically excludes companies that, based on external data, supply dedicated components for controversial weapons and meet criteria for involvement in the production of controversial weapons through their own operations or ownership. PFA is not precluded from investing in companies that supply components to the French, English, or American nuclear defense.

International norms

A rules-based world creates the best conditions for economic growth and prosperity. Therefore, we do not invest in companies that violate international norms and guidelines that form the basis for PFA’s Policy for Responsible Investments and Active Ownership. Breach of norms are identified using data from external providers. 

If norm breaches occur or are suspected after the time of investment, we identify the scope, severity and frequency of the violation and initiate active ownership efforts to ensure that the breach is brought to an end. If PFA assesses that the company does not improve its behaviour sufficiently and in a timely manner, the active ownership effort will be escalated, for example by PFA voting against all or part of the company’s management at the company’s general meeting. If PFA does not believe that there is a responsible relationship between the current risk-adjusted return and the sustainability risk, the company will be excluded. Such a decision is based on a specific assessment and must be approved by the group executive board.

 
The exclusion criteria above are based on quantitative data points selected by PFA and supported by independent data suppliers. The quality of supplier data is therefore relevant to the effectiveness of the process. 

You can read more about PFA’s approach to the exclusion of companies in PFA’s guidelines for sustainability risks

For additional exclusion criteria applicable to PFA Climate Plus, please refer to this page

PFA’s approach to the exclusion of government bonds

PFA excludes countries that are either subject to international sanctions or which PFA has assessed as being inappropriate to invest in. In addition, PFA can deselect countries’ government bonds in its management based on sustainability risks, such as low levels of democracy or vulnerability to corruption.

PFA also bases its decision on the foreign policy recommendations issued by Denmark and the EU. In addition, PFA further screens government bonds on an ongoing basis based on the EU’s Principal Adverse Impacts (PAI) indicators to assess and monitor developments in sustainability factors. The mandatory PAI indicators, which are relevant for government bonds, include, for example, consideration of countries’ greenhouse gas intensity and whether they comply with social rights and legislatively comply with international treaties, conventions and UN principles.

If an excluded country is to be included as one that is suitable to invest in again, this, at minimum, requires that the objectionable circumstances identified by PFA have been significantly improved and that this can be documented.

Read more about our approach to working with responsible investments