Exclusion of Companies and Countries

Exclusion of companies and countries

PFA’s investments aim to provide security for our customers. Therefore, PFA generally does not wish to limit its investment universe through exclusions. PFA seeks to influence companies that we believe should change their behavior through active ownership because they act in violation of our Policy for Responsible Investments and Active Ownership or other PFA policies.

If PFA does not believe there is a basis for an active ownership dialogue, the executive management may choose to exclude a company. Similarly, they may choose to exclude a company or country if its behavior fundamentally conflicts with PFA’s values.

Finally, PFA excludes companies based on the criteria listed below in relation to climate, weapons, international norms, and government bonds.

 

  

Climate

PFA has decided to implement threshold values for climate-related high-risk activities. PFA will exclude companies that exceed quantitative limits for climate-related high-risk activities. These quantitative limits indicate that there is fundamentally no proper balance between risk-adjusted returns and climate risk.

  • 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*
  • Bonds issued by oil and gas companies. This is ensured by following a benchmark without positions in fossil energy companies.

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 persistently working to ensure that the company moves in a greener direction.

*Violations of these threshold values for climate-related high-risk activities are disregarded if the investment product is a green bond.
**Oil and gas producers are excluded based on the Bloomberg Fixed Income Classification System (BCLASS) sector Energy for corporate bonds and MSCI's Global Industry Classification Standard (GICS) industry name Oil, Gas & Consumable Fuels for equities

Weapons

Based on the international conventions and guidelines, PFA also does not want to invest in companies that produce controversial weapons such as cluster bombs or 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.

Good governance practice

PFA does not invest in companies that violate PFA's criteria for good governance practices. These criteria are based on controversy levels within four categories:

  1. Accounting & tax issues
  2. Governance structure
  3. Employee relations, including human rights
  4. Employee compensation.

The exclusion criteria mentioned above are based on quantitative data points selected by PFA and supported by independent information providers. Therefore, the quality of the providers' data is crucial for the effectiveness of these practices.

Internationale normer

A rules-based world creates the best conditions for economic growth and prosperity. Therefore, we do not invest in companies that violate international standards and guidelines that form the basis for PFA’s Policy for Responsible Investments and Active Ownership. If violations 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 violation 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 divested. Such a decision is based on a specific assessment and must be approved by the Executive Management.

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

Overview of excluded companies:

The exclusion list below shows the companies that Executive Management has chosen to exclude based on an individual assessment. The list is updated at pfa.dk in case of changes. Companies that violate our exclusion criteria described above are excluded from the investment universe and do not appear on the exclusion list.

Company Country Sector Reason for exclusion
Alibaba Group China Consumer Discretionary Lack of Consumer Protection
PDD China Consumer Discretionary Lack of Consumer Protection
MacQuarie Group Australia Financials Dividend Tax Fraud

PFA’s approach to the exclusion of government bonds

PFA excludes countries that are either subject to international sanctions or that PFA has assessed as non-investment-worthy. Additionally, PFA may exclude government bonds from certain countries based on sustainability risks, such as poorly developed democracy or vulnerability to corruption.

PFA bases its approach on the foreign policy guidelines set by Denmark and the EU. Furthermore, PFA continuously screens government bonds based on the EU's Principal Adverse Impacts (PAI) indicators to assess and monitor developments in sustainability factors. Relevant mandatory PAI indicators for government bonds include considerations such as a country's greenhouse gas intensity and whether they uphold social rights and comply with international treaties, conventions, and UN principles. If an excluded country is to be reconsidered as investment-worthy, it requires significant improvement in the identified issues and proper documentation.

Currently, the following countries are excluded:

  • Belarus
  • The Republic of Congo
  • Rwanda

This list only contains countries where PFA itself has refrained from investing in government bonds, and thus does not include countries such as Russia, North Korea, Syria and Iran, which are not possible to invest in as a result of international sanctions, as well as those countries which do not have government bonds, or which do not constitute an attractive investment market for these. We evaluate the exclusion list at least once every six months. There are many countries that PFA is not currently invested in due to sustainability and investment reasons, this also applies to countries that are not on PFA’s exclusion list or covered by international sanctions. 

Read more about our approach to working with responsible investments