PFA Climate Plus

Your pension is your most important climate investment

PFA Climate Plus enables you to place you pension savings in extra climate-friendly investments. The goal is that the investments will remove more CO2 from the atmosphere than they emit by 2030.

PFA Climate Plus is based on three concrete climate goals

When PFA invests pension savings it is always based on responsibility, sustainability and based on the Paris Agreement and the UN Sustainable Development Goals. With PFA Climate Plus you can go one step further in supporting the climate-friendly transition. It is both manageable and flexible since the climate objective is based on three concrete climate goals.

From the outset, the equity portfolio in Climate Plus will emit 60 % less CO2 than the global equity index (MSCI ACWI)1.

 


    

As we approach 2025, the ambition is for the entire product to be CO2-neutral2.


    

As we approach 2030, the ambition is for the entire product to be CO2-negative2, removing more CO2 from the atmosphere than the investments emit 

1 The MSCI All Country World Equity Index measures CO2 by Scope 1 and Scope 2 (see later in the text) in the listed equity portfolio in tons of CO2 emitted per million USD invested.
2 We attempt to achieve this goal by investing in forestry and technology that removes CO2.

How we ensure the climate goals

To ensure that we stay within our climate goals, we continuously measure CO2 emissions from our portfolios and compare it to the world equity index. As the model shows, the shares in PFA Climate Plus emit 78 % less CO2 than the world equity index, while the shares in PFA Plus currently emit 21 % less CO2.

Source: MSCI 30.06.2020
CO2 emissions in investments are measured in tonnes per USD million invested. For MSCI ACWI, CO2 emissions were 126,8 tons per USD million invested medio 2020, while in PFA Plus and PFA Climate Plus emissions were respectively at 100,7 and 28 tonnes per USD million invested.

  

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.    

 

From hybrid ferries to warehouses

Climate-friendly investments can mean many things as it is not only about wind energy and solar power. Here is a selection of the investments that are part of PFA Climate Plus.
  

Sustainable hybrid ferries reduce the CO2 emission

PFA’s investment in Scandlines shows how PFA makes your pension savings work extra hard for the climate in a sustainable and responsible way. PFA is co-investor of DKK 1,35 billion in a greener transition for Scandlines. Among other things, their hybrid ferries minimize the fuel consumption and reduce the CO2 emission with about 15.000 tonnes yearly. Scandlines will be part of PFA’s climate-friendly product PFA Climate Plus, and the investment is a good example of how good return and a climate agenda can easily work together.

 


Climate-friendly investment in Aarhus

When PFA make responsible investments, it could be in sustainable property such as “Pakhusene” (“the Warehouses”) in Aarhus. This has a gold certification in sustainability from DGNB. The Warehouses will be part of PFA’s extra climate-friendly product PFA Climate Plus, with the ambition of being CO2 neutral by 2025.

 

PFA Plus vs. PFA Climate Plus

More climate-friendly investments but the same risk and return potential

Climate-friendly investments should not have a cost on the return. Therefore, the risk level and expectations for the return in PFA Climate Plus are the same as in PFA’s other savings solution, PFA Plus. However, the return will develop differently because the products are invested differently.

Many of the investments in PFA Climate Plus are also included in PFA Plus, but not vice versa. This is because of the extra high climate demands that only a limited number of companies can live up to. PFA Climate Plus thus contains far fewer companies than PFA Plus, and this can give greater fluctuations, especially in the short term, because there are fewer investments to balance out each other. But pension savings are long-term, and as a rule you get the same level of risk and return potential by investing your savings greener with PFA Climate Plus.

Only customers with PFA Plus Market Rate Saving have the opportunity to choose PFA Climate Plus. You can contact PFA on 70 12 50 00 and get an answer on whether you can place your investments in PFA Climate Plus.

 
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Overview of the difference between PFA Plus and PFA Climate Plus

The chart below illustrates a comparison of the two products on the basis of a number of parameters:


Parameters PFA Plus  PFA Climate Plus
Responsible investments and active ownership ✔ 
Extra focus on climate
✔ 
Fossil fuels ✔ 
CO2 emission in terms of the global stock index -21 % -78 %
Goal to be CO2 -neutral by 2050 2025
Alternative investments and properties Approx. 23 % currently Approx. 20 % over time
Risk in relation to PFA Plus
Comparable risk with PFA Plus*
Expected return in relation to PFA Plus
Same long-term return as PFA Plus
APR 0,6-0,99 % 0,6-0,99 %
Scaling down towards retirement ✔ 
* The equity portfolio in PFA Klima Plus consists of fewer shares (approximately 50) and has a core theme of reduced climate impact. This means that the concentration risk is greater in PFA Climate Plus. At the same time, PFA Climate Plus has a so-called scenario risk if, for example, the political and business climate focus shifts significantly in relation to the current one.



Specific criteria for PFA Climate Plus

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
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.
   

Next gen care

With PFA Climate Plus you can get all or parts of your pension savings to work extra hard for the climate. In this way you contribute with tonnes of next gen care and a more sustainable future for your children and grandchildren.