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.    

Here you can see the climate criteria that apply to the various assets of PFA Climate Plus: 

Shares
Like PFA’s other investments, the PFA Climate Plus portfolio is assessed on the basis of the requirements we have set for our responsible investment policy. There is also an additional regard for climate, which means, for one thing, that investments in oil, coal and gas companies are excluded. It also means that the equity portfolio will be far more focused on climate-friendly companies. Whereas the current equity portfolio in PFA Invest includes approximately 1,000 companies, currently the equity portfolio in PFA Climate Plus includes only approximately 50 companies.

Bonds
When it comes to bonds, to a far greater extent than in PFA’s other investments, PFA Climate Plus will use so-called ‘green’ bonds, issued for the funding of measures that help tackle the climate challenge. The same requirements apply to corporate bonds as to shares. There is no investment in bonds from oil, coal and gas companies, and bond issuers must have a climate-positive business model. PFA will also invest in ordinary government and mortgage bonds.

Derivatives
PFA Climate Plus will also use derivatives (financial contracts for assets) based on shares, interest rates, etc. to ensure optimal risk management. Equity derivatives are subject to the same requirements as the equity portfolio in PFA Climate Plus.

Alternative investments and properties
Alternative investments and properties are a very important part of the existing PFA Plus product. The idea is also for PFA Climate Plus to invest approximately 20 % of the portfolio in alternative investments and properties. These investments must also meet the climate requirements that apply to PFA Climate Plus. Therefore, the development of the alternative and property portfolio is expected to be a gradual process.