“Green principles for sale”: PensionDanmark invests in new coal mines

Over the past year, PensionDanmark has invested millions in new coal giants that undermine the pension fund's own climate goals. "It reveals high-level greenwashing", is the criticism.

PensionDanmark has invested in a number of fossil fuel companies that own coal mines. This includes the Indian National Thermal Power Corporation. PensionDanmark is now excluding the company due to Danwatch's revelation. Photo: Chris Stowers/PANOS/Scanpix

In the creation of this article, we have made use of the Pension Machine. Developed by Danwatch.

Since October last year, Denmark’s third largest pension fund has made a remarkable decision.

The pension fund, which is jointly owned by the trade union 3F and the Confederation of Danish Industry, has welcomed new fossil fuel investments worth almost one billion Danish kroner.

One third is invested in 17 global coal companies, which together own 132 coal-fired power plants, 12 operating coal mines and 9 new ones under construction.

This is revealed in an investigation of PensionDanmark’s latest equity and bond investments, carried out by Danwatch in collaboration with Finans.dk.

The investments are controversial. In addition to the annual CO2 emissions from coal power plants, which are many times higher than Denmark’s annual emissions, the investments also undermine PensionDanmark’s climate commitments to exclude coal mines and phase out coal power plants.


New coal mines and power plants

The map shows coal mines and coal power plants that PensionDanmark is connected to via new equity and bond investments made in the period from October 2022 to November 2023.

Sources: Global Energy Monitor, Urgewald and PensionDanmark’s holding lists. See all of PensionDanmark’s investments in the Pension Machine

High-level greenwashing

In 2019, PensionDanmark was a co-founder of the UN investor alliance Net-Zero Asset Owner Alliance (NZAOA). Membership commits to investing towards the goal of carbon neutrality by 2050. According to the International Energy Agency (IEA), in addition to stopping new investments in coal, it requires the phasing out of existing coal-fired power plants by 2040.

“No further coal-fired power plants should be financed, insured, built, developed or planned,” the alliance writes in a position paper.

Danwatch has presented the investments to Therese Strand, Associate Professor of Corporate Governance and researcher in institutional investors at Copenhagen Business School. She now criticises PensionDanmark for greenwashing.

In my opinion, this is high-level greenwashing.
Therese Strand
Copenhagen Business School

“PensionDanmark has promised its customers to support carbon neutrality by 2050, which means phasing out coal. They must deliver on this. In addition, they are a member of the Net-Zero Asset Owner Alliance, which under UN auspices obligates them in relation to other investors. In my opinion, it is high-level greenwashing to continue with new investments in energy companies that expand production from burning coal,” says Therese Strand.

PensionDanmark’s Head of Sustainability and ESG, Jan Kæraa Rasmussen, rejects the criticism. He does not believe that the new investments of over DKK 300 million in coal are problematic because the companies also make money on other things.

“I cannot see how this is greenwashing. When we calculate the coal share of revenue in the companies on the list (the list of new coal companies, Ed), our exposure is around DKK 100 million. We can vouch for that. I cannot take responsibility for more than what we have financed,” says Jan Kæraa Rasmussen.

I cannot take responsibility for more than what we have financed.
Jan Kæraa Rasmussen
Head of ESG, PensionDanmark

PensionDanmark excludes coal giant

Among PensionDanmark’s new investments is, for example, the Indian energy giant National Thermal Power Corporation (NTPC). According to data from Global Energy Monitor and Urgewald, NTPC is building new coal mines and increasing coal production from existing mines.

NTPC is therefore also one of the most excluded companies among Danish institutional investors, with Danske Bank and most recently Nykredit blacklisting the company.

NTPC states that they will keep their coal mines and power plants running beyond 2040 – partly due to the Indian government’s policy to increase the country’s coal production. The NTPC share has increased by 40 percent since the beginning of the year and has already been a good investment for PensionDanmark.

Nevertheless, PensionDanmark states that based on Danwatch’s investigation, they now exclude NTPC because the company is building new coal mines. The reason is that it is in direct conflict with the pension fund’s exclusion policy of “divesting from mining companies that start new thermal coal extraction”.

“In relation to NTPC, they supply power, including green power. We screen for new coal mines annually in December based on the IEA’s inventory, but based on your inquiry, we have already taken a closer look at NTPC and can see that they have applied for a new coal mine. Therefore, we are initiating an exclusion process, and NTPC is already out of our portfolio,” says Jan Kæraa Rasmussen.

Immediate divestment is one thing. Another question is why it only happens when Danwatch makes enquiries and why the investment was made in the first place?

“The exclusion decision is based on it being a new coal mine, and we did not have that information before or when we made the investment,” says Jan Kæraa Rasmussen.

With the upcoming exclusion of NTPC, five of a total of 21 new coal mines that can be linked to companies in the investment portfolio of PensionDanmark will disappear. Coal mine expansions continue to take place, among them the expansion of the Caval Ridge coal mine in Queensland Australia. The mine is owned by BHP and Mitsubishi Corporation, both of which are on PensionDanmark’s holding list.

If the parent companies of the mine owners are included, more can be added. For example, the expansion of the Carmichael Coal Project, also in Australia. The mine is owned by the Adani Group. PensionDanmark has invested in two Adani Group-controlled companies, Adani Ports & Special Economic Zone and Adani Electricity.

Investing in new coal power plants

PensionDanmark has added many new coal power plants through new investments in one of China’s largest energy producers, China Resources Power Holdings, the Czech Republic’s largest company, CEZ, the US energy company Dominion Energy and many more.

They are additional to other coal investments, including Korea Electric Power Corporation (KEPCO), which co-owns a huge coal power plant in Suralaya in the Banten province of Indonesia. KEPCO is expanding the plant, but the expansion does not cause PensionDanmark to exclude the company.

“We have a green partnership with KEPCO and they are very aware that they are being criticised for their energy mix. We need to keep the dialogue with them, and KEPCO is not where they need to be. We are invested in CIP, which has signed agreements for the supply of green power from 900 MW offshore wind connected to KEPCO’s grid, and we can easily justify investing in the company, even though there is a clear potential for improvement,” says Jan Kæraa Rasmussen.

NTPC and KEPCO are far from the only coal companies in the investment portfolio. According to PensionDanmark’s own calculations, a total of DKK 905 million has been invested in coal companies.

More than half of the new coal companies on the investment list do not have a phase-out date for their coal power plants, which is a prerequisite for achieving carbon neutrality by 2050.

According to Jan Kæraa Rasmussen, phasing out coal must be understood in relation to the specific situation. The UN alliance’s recommendation for a phase-out by 2040 is not an ultimate requirement to fulfil, says Jan Kæraa Rasmussen.

“The recommendation to phase out coal is not open to interpretation, but how you work with the recommendations may differ. I can guarantee that we are continuously tightening our requirements in relation to what is realistic,” says Jan Kæraa Rasmussen in response to the criticism.

Several coal companies seem to be working with the same logic. For example, Japanese companies Sumitomo and Mitsubishi have adopted climate plans but are still involved in coal.

Alliance partner demands explanation

NZAOA is endorsed by the World Wide Fund for Nature (WWF), which both provides the logo for the communication and puts credibility at stake as an official strategic advisor and alliance partner. Secretary General of WWF in Denmark, Bo Øksnebjerg, demands an explanation from the pension fund after Danwatch has reviewed the investments with him.

The world doesn’t need new investments in coal.
Bo Øksnebjerg
Secretary General, World Wide Fund for Nature WWF

“We want to make sure that the alliance members keep their agreements, which is why we have also contacted PensionDanmark to get an explanation of the investments. The world does not need new investments in coal, and our recommendation is not to invest in coal companies,” says Bo Øksnebjerg.

Bo Øksnebjerg also refers to the spirit of the alliance, which he believes PensionDanmark discredits.

“The agreement in the alliance is that coal companies will be phased out and these new investments do not support that. We are very disappointed. We do not believe that new coal investments are the way forward to fulfil the responsibility of reaching the goal of carbon neutrality. Nor do we believe that it reflects the spirit of the alliance’s rules of the game,” says Bo Øksnebjerg.

Green principles for sale

As we all know, the devil is in the detail. PensionDanmark’s CSR report states that coal should “as far as possible” be phased out by 2040. In the excruciatingly clear light of hindsight, this formulation looks like the perfect hedge against a change of mood in the financial markets. For example, when green investments are in decline and black investments are soaring, as is currently the case.

However, a change of CEO and a new dawn in the financial markets does not absolve a pension fund of responsibility, according to Therese Strand.

“Even if the financial markets turn and it becomes expensive to be climate-friendly, you cannot run away from your sustainability promises or green goals. Perhaps PensionDanmark has promised too much on the climate front, and now they cannot live up to it. The timing of the investments makes it clear that it is money and returns that speak. The principles were something they had as long as they could make money on it,” says Therese Strand.

In October 2023, PensionDanmark’s total fossil fuel investments in oil, gas and coal companies are estimated at DKK 4.7 billion.

See all of PensionDanmark’s investments in the Pension Machine.


Coal power plants and phasing-out plans

The map shows the coal power plants that can be connected to PensionDanmark’s investments. More than half of them do not have a phase-out plan.

According to the UN’s Net-Zero Asset Owner Alliance, existing coal power plants must be phased out by 2040 if the alliance’s climate goal of carbon neutrality is to be realised. PensionDanmark is a co-founder and member of the alliance.

Source: Net-Zero Asset Owner Alliance, position paper on coal investments.
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