Stockholm (Ekonamik) – There are no easy solutions to the climate challenge. This is well understood, but Danish pension fund ATP has settled on a different – many would say, controversial – manner of approaching the problem, as it became clear last week that it would not be divesting from some of the oil companies on its roster. It doesn’t make sense to exclude and blacklist the world’s oil companies, the pension fund, which provides Denmark’s largest lifelong pension plan, argues, underlining its intent to retain shares from those oil companies deemed to be the “least polluting,” instead of excluding all the world’s oil companies with one broad stroke.
That position practically automatically warrants criticism, as ATP chief executive for Corporate Social Responsibility (CSR) and sustainability Ole Buhl readily acknowledged to Politiken, a Danish broadsheet, last week upon confirming the pension fund’s strategy going forward. It is Mr Buhl’s responsibility to try to get the pension fund’s over 5 million customers to understand the nuances of its new approach to fossil fuel investments. One issue is that working Danes are obliged to opt into the fund, meaning they cannot simply decide to leave as a matter of individual choice or personal conscience. Thus, as the largest pension fund in Denmark and with Danes mostly opposed to pension companies investing in oil, coal and gas at all, according to a recent poll conducted by Megafon, a polling firm, it may be a tall order for the pension fund to explain such nuances to the public at large.
Indeed, condemnation from organisations involved with stopping the extraction of fossil fuels such as Greenpeace and from Danish politicians was swift. “It’s as if ATP is saying: ‘We know the planet is burning, and since it will burn for a few more years, we’ll let it burn,” said Lars Koch, political head at Greenpeace Nordic Copenhagen, who did, however, praise ATP’s decision to publish a list of its fossil fuel investments.
But Mr Buhl is adamant that things are not as simple as they appear. “Regardless of how we and others act, we will still need oil for many years to come. This is also the assessment of the UN Climate Panel. And when that is the premise for our work, the best thing we can do overall is to contribute to it being the right kind of oil, so as to do the right thing for the climate,” Mr Buhl said. “When we drive our cars, we can’t see how the oil was produced and how much that damaged the climate. But the fewest are aware that there are big differences in terms of the climate effects. Some oil companies expend a lot of energy on extracting oil – while others spend a lot less.”
“And if we are to achieve the ambitious goals of the Paris Agreement, then we need to focus much more on these differences and address them. That is what we are doing now.” Mr Buhl adds, underlining that ATP has studied a recent major research project from Stanford University with a country-by-country study measuring the climate footprint of oil production which finds stark differences in the carbon-intensity of global oil fields, and is proceeding with its investments according to the results of that study. “We have continued to work along the lines of the results [of that study]. We have bought a lot of data on oil companies around the world, multiplying and dividing the results so as to compile a world map that shows there are simply some companies that emit more CO2 than is acceptable [and where they are]. We have now thrown these out [of our investment portfolio]. Then there is an intermediate group where we are still assessing the companies’ climate impact and are in dialogue with several of them to find out whether we should still be investing in them or whether we should withdraw.”
Mr Buhl says four companies were eliminated in the first round, with seven being evaluated in the intermediate group. But this begs the question of what constitutes, for ATP, the difference between ‘clean’ and ‘dirty’ oil producers. Mr Buhl points to the difference between Canada, where the oil is extracted from sandy, layered soil which requires a very dirty production process, and Denmark, where the extraction process is relatively smooth and produces a relatively good quality. There are also differences in gas emissions, where some oil fields burn unnecessary amounts of gas into the atmosphere in a process known as flaring, which makes a difference in terms of the climate footprint, Mr Buhl says, pointing to World Bank estimates that the amount of gas burned annually in connection with oil extraction corresponds to the whole of Africa’s annual energy consumption. Likewise, the research from the Stanford study shows “that a country like Algeria, which produces the lightest crude oil in the world, has the highest carbon intensity because oilfield operators routinely burn large amounts of gas. Saudi Arabia, meanwhile, has relatively low carbon intensity because it flares little gas and has vast resources with low water content, which means less energy goes into treating and separating the oil,” according to the lead author of the study, Mohammad Masnadi. The point with the kinds of investments ATP makes, then, would be to steer companies away from such unnecessary gas emissions through its active ownership.
Still, ATP maintains that this strategy is part of its overall transition to clean energy. ATP investments in the oil industry amount to some DKK 5.5 billion, by comparison to around DKK 20 billion in green investments. “Make no mistake, we are at full speed on the way out of investments in oil and into green investments. We support the government’s ambitious climate plan, we are part of Climate Action 100 and we are committed to achieving the objectives of the Paris Agreement. It just doesn’t change the fact that we are going to have black energy for quite some time yet.” Mr Masnadi of the Stanford study concurs: “Everybody lives based on these fossil fuel resources. It’s not very feasible to get rid of this energy resource in one night or in one year.” The question is how to accelerate that transition. Part of the answer provided by this paper is understanding in fine detail where we stand today – and why.”
Disagreement on the issue, though, is going to remain intractable for some time. “They have to remember that they are responsible for people who will have money in 50 years,” said Ida Auken, a politician from Denmark’s centre-left radical party. “I get upset when I hear they have so little foresight. 40 per cent of the world’s oil is used in cars and generators. And there is a lot of agreement that electric cars will be highly competitive in a couple of years.” But, as Mr Buhl retorts, “[i]t is a highly contested area and also characterised by rather immutable attitudes…. Easy solutions to climate problems don’t exist. But we fundamentally believe that we have chosen the strategy that is the best for the climate and which will provide for the largest reductions in CO2 emissions. This is our way, [and] other pension companies must choose theirs.”
“You don’t get anywhere by just opting out.”
Image: Williston North Dakota Oil Field Oil Rig (Wikimedia Commons)