How we will ensure the fulfilment of the climate goals
To make sure that we meet our climate goals while working to secure the best possible return for our customers, we will measure carbon emissions for our portfolios on an ongoing basis and compare them with the global index. As the model shows, the shares in PFA Climate Plus emit 80 % less carbon than the global index, while all PFA's equities currently emit 19 % less carbon.
Source: MSCI - For all equities, it is a weighted average for the year based on monthly metrics. For Climate Plus it is a weighted average for January - June 2021.
PFA obtains figures from the global equity index, MSCI
PFA’s work with climate goals depends on the ability to measure and monitor our equity investments’ CO2 emissions. This is not straightforward as there is still a lack of adequate data for many assets. Therefore, as a default, PFA only measures systematic CO2 emissions from the equity portfolio and not from e.g. the bond portfolio or our alternatives.
PFA’s assessments and benchmarks are based on data from the MSCI ACWI (All Country World Index), which annually publishes estimates for the CO2 emissions of individual companies. Even though MSCI is currently the market standard for measuring CO2 emissions from an equity portfolio, the data used is still subject to a degree of uncertainty. This is partly because a lot of data is retrospective and may be a year or two old; and partly because there are still many companies that do not even publish data on their CO2 emissions. In the latter case, MSCI itself assesses emissions by using comparable companies in the same industry and locality.
MSCI’s assessment takes into account three different aspects of a company’s CO2 emissions. These are known as ‘Scopes’. While there is reasonably reliable data for Scopes 1 and 2, Scope 3 is subject to great uncertainty and is difficult to calculate. Consequently, it is not currently included in the measurement or benchmark of PFA Climate Plus.
• Scope 1 is the CO2 emitted by a company’s activities – e.g. manufacturing, etc.
• Scope 2 is the CO2 for which a company is indirectly responsible – e.g. CO₂ from energy produced for the company.
• Scope 3 is the CO2 emitted by the company’s other indirect activities: in other words, sources that companies do not own, control or manage. This might be, for example, the application of a company’s products.
PFA Climate Plus investment profile A, investment profile B, investment profile C and investment profile D are savings products that, among other characteristics, promote environmental and social characteristics.
Read moreRead lessAmong other things, this is done by the products having a strong focus on climate issues. PFA continually monitors whether the companies in the products comply with international norms or conventions for areas such as environmental protection, labour rights and human rights and exercising active ownership via voting and corporate dialogues and by excluding specific companies and countries. With PFA Climate Plus, the energy sector is also excluded to not invest in the extraction of fossil fuels.
The PFA Climate Plus products also contribute to the EU’s environmental targets by, among other things, investing in companies that supply solutions for the stabilisation and reduction of greenhouse gases and/or reduce or prevent negative impacts from current or expected climate changes. In addition, investment has been made in leading companies working with the green transition, companies that are focused on reducing their carbon footprints (including having targets) to be compatible with keeping global average temperatures from increasing more than 2 degrees, green bonds, real estate projects being built/renovated based on sustainable standards and direct investments in renewable energy infrastructure.
The risk profile of PFA Climate Plus is similar to the savings option in PFA Plus. However, the return will evolve differently as the products invest in different assets. Principles, social and business ethical matters are in line with PFA’s policy for responsible investments and active ownership.
Environmentally sustainable investments
The proportion of PFA Climate Plus investment profile A, investment profile B, investment profile C and investment profile D’s environmental sustainability is assessed based on whether the investments’ economic activity actively contributes to one or more of the EU’s environmental targets, whether they do not have a significantly negative impact on the EU’s environmental targets and whether the companies operate in accordance with the OECD’s guidelines for multinational companies and the UN’s guiding principles for the private sector and human rights.
The calculation of the product’s proportion of environmentally sustainable investments pursuant to the EU taxonomy regulation is presented in the table below. There is only very limited data available on the parameter of environmental sustainability, as companies have only been obliged to report on this (pursuant to the EU’s taxonomy regulation) from 1 January 2023. The proportion of environmental sustainability is therefore based on estimates. The estimates are based on assessments and data from external data suppliers and consultants and will gradually be phased out once reports from the companies are available. The below statement of the proportion of environmentally sustainable investments is therefore not considering the EU’s technical screening criteria as companies are not at present reporting how they are complying with this.
PFA Climate Plus investment profiles’ proportion of investments aligned with the EU’s environmental taxonomy
Note: The figures were calculated on 31/12/21.
||Estimated for the EU’s environmental targets 1-6
|PFA Climate Plus investment profile A
|PFA Climate Plus investment profile B
|PFA Climate Plus investment profile C
|PFA Climate Plus investment profile D
Note: The proportion of environmentally sustainable investments is decreasing based on time left until retirement due to the gradual reduction of risk. The calculated proportions are before the gradual reduction is initiated.
Note: The taxonomy regulation defines six climate and environmental targets that economic activities can significantly contribute to in order to be classified as climate and environmentally sustainable. 1. Climate change mitigation 2. Climate change adaptation 3. Sustainable use and protection of water and marine resources 4. Transition to a circular economy 5. Pollution prevention and control 6. Protection and restoration of biodiversity and ecosystems.
Kilde: MSCI and analyses made by PFA and/or external consultants.
In PFA Climate Plus, investments are also made in green bonds, but these have not yet been included in the proportion of environmentally sustainable investments pursuant to the EU’s environmental taxonomy. The work on achieving this continues. The proportion of green bonds is as at 29/10/21 respectively 28 %, 19 %, 10 % and 0 % in investment profiles A, B, C and D with 20 years until retirement.
The “do no significant harm” principle applies only to those investments underlying the financial product that take into account the EU criteria for environmentally sustainable economic activities. The investments underlying the remaining portion of this financial product do not take into account the EU criteria for environmentally sustainable economic activities.
For example, this means that PFA Climate Plus investment profile D, which has an 8,6 % proportion of sustainable investments (pursuant to the EU’s taxonomy regulation) may well have a larger proportion of sustainable investments, but the remaining investments do not meet all of the EU’s criteria for being included in the statement of environmentally sustainable investments under the EU’s taxonomy regulation.
Categorisation according to the EU’s Sustainable Finance Disclosure Regulation (SFDR)
PFA Climate Plus investment profile A, investment profile B, investment profile C and investment profile D are categorised pursuant to Article 8 as partially sustainable products in terms of the EU regulation on sustainability‐related disclosures in the financial services sector (SFDR).
You can learn more about PFA Climate Plus and how we work with complying with our policy for responsible investments and active ownership here