Exclusion of companies and countries

Exclusion of companies and countries

PFA's approach to excluding companies

PFA’s investments are intended to ensure long-term financial security for our customers. As such, we do not seek to limit our investment universe through exclusions as a first step. Instead, we prioritise active ownership and initially attempt to influence the companies that we assess need to change their behaviour due to violations of PFA’s Policy for Responsible Investments and Active Ownership or other PFA policies.

If PFA determines that there is not sufficient basis for active ownership dialogue, the group executive board may decide to exclude a company. Similarly, they may choose to exclude a company if its conduct is fundamentally inconsistent with PFA’s values.

Finally, PFA applies exclusion criteria based on defined risk thresholds relating to climate, weapons, and international standards. Companies that do not meet these criteria are excluded from our investment universe. 

 

  

Climate

PFA excludes companies that violate certain quantitative limits for climate-related high-risk activities. These thresholds reflect situations where there is generally not an appropriate balance between risk-adjusted returns and climate-related risks. 

  • Companies deriving more than 5% of total revenue from oil extraction from tar sands or from thermal coal*
  • Companies deriving more than 5% of total revenue from coal-based energy production*
  • Companies expanding coal mining or coal-based power generation*
  • For corporate bonds, companies classified as oil, gas, 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 acts as co-lead investor in the engagement with TotalEnergies under the Climate Action 100+ initiative and continues to work actively to ensure that the company transitions in a greener direction.

*Any breach of these thresholds for climate-related high-risk activities is disregarded where 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) Sub-industry name Integrated Oil & Gas for equities.

Weapons

In line with 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 structures. PFA is not precluded from investing in companies that supply components for the French, British or American nuclear defence systems.

International standards

A rules-based world creates favourable conditions for economic growth and long-term prosperity. Therefore, PFA does not invest in companies that violate the international standards and guidelines that underpin PFA’s Policy for Responsible Investments and Active Ownership. Potential violations are identified using data from external providers.

If a violation is identified or suspected after the time of investment, PFA assesses the scope, severity and frequency of the issue and initiates active ownership efforts aimed at bringing the violation to an end.
If PFA assesses that the company does not improve its behaviour sufficiently and within an appropriate timeframe, the engagement will be escalated, for example by voting against parts of or the entire board and management at the company’s general meeting. 
If PFA ultimately concludes that there is not an appropriate relationship between the expected risk-adjusted return and the sustainability risk, the company will be excluded. Such decisions are based on a case-by-case 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 providers. The quality of the underlying data is therefore important for 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 that PFA has otherwise assessed as inappropriate for investment. In addition, PFA may deselect government bonds based on sustainability risks, such as low levels of democracy or a high risk of corruption.

PFA also takes into account foreign policy recommendations issued by Denmark and the EU. Furthermore, PFA screens government bonds on an ongoing basis using the EU’s Principal Adverse Impacts (PAI) indicators in order to assess and monitor developments in key sustainability factors.

Read more about our approach to working with responsible investments