Fossil Fuel Policy - aligned with the Paris Climate Agreement
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The policy is owned by the Responsible Investment Team in Nordea Asset Management. Latest update by Nordea Funds Communication: 09-02-2021.
Fossil Fuel Policy
- aligned with the
Paris Climate Agreement
A policy for excluding fossil
fuel companies that are not
demonstrating a transi-
tion in line with the central
climate objectives of the
Paris Agreement.
1. Introduction
Nordea Asset Management’s Responsible the Paris-Aligned Fossil Fuel List, or some-
Investment Policy state our commitment to times the Nordea Fossil Fuel Transition List.
align our portfolios with the Paris agree- Companies not on that list will be excluded.
ment, which means that, over time, our
investment strategies should be consistent
with limiting global warming to below 2°C.
The most important measure we can take
to limit global warming is to bring down
emissions from fossil fuels. In order to meet The policy requires all
the 2°C target, the emission budget for fossil
fuels, or the total annual fossil emissions that
fossil fuel companies to
the atmosphere can tolerate, will decrease demonstrate that they
every year, and the challenge is for compa- have a decarbonization What companies are in scope for the assesses large listed companies in high-emit-
nies to stay within that budget.
strategy that is consistent screening? ting sectors on two dimensions:
The complete elimination of fossil fuels in
most countries is a decade or more away,
with 2°C of global The policy only applies to fossil fuel compa-
1. Carbon Performance: The alignment of
and many of the key energy providers of warming or less. These nies. These are defined as companies that
a company’s emissions intensity with a 2°C
derive more than 5% of total revenues from
tomorrow are currently in a phase-out period companies are put on the exploration, production or distribution of global warming scenario; and
where they are reducing the use of fossil fu-
the Paris-Aligned Fossil fossil fuels, as well as companies that derive
els, but many others do not have meaningful 2. Greenhouse Gas Management Quality: The
plans for transitioning to clean energy. With Fuel list. Companies that more than 50% of revenues from services
quality of a company’s climate governance
that are essential and specific to fossil fuel
the NAM Paris-Aligned Fossil Fuel policy, we are not on the list will extraction. (on a scale from 0 to 4)
will maintain the possibility to stay invested be excluded from funds
in companies that help accelerate the transi- The emission intensity alignment is based on
tion to clean energy and phase out of fossil adhering to the policy. In addition, the policy excludes all compa-
sector-specific emissions intensity bench-
nies that are involved in so-called unconven-
fuels, and will divest from companies that marks, according to the so-called Sectoral
tional fossil fuel extraction methods. These
are slowing the transition down. Companies Decarbonization Approach (SDA). SDA
methods include Arctic drilling, oil sands
with a transition strategy that is aligned with benchmarks indicate, for the given sector,
extraction, and hydraulic fracturing (shale
the 2°C target are put on a whitelist called what emissions intensity is aligned with 2°C.
oil/gas).
The policy only applies to corporates. These benchmarks exist for electricity utilities
and primary energy (oil & gas), but not for all
other sectors in which fossil fuel companies
How is the Paris-Aligned Fossil Fuel list (as defined for the purposes of the policy)
constructed? are found. For example, no emission intensity
benchmark exists for gas utilities.
The Responsible Investments (RI) team
within Nordea Asset Management compiles ‘Generally, for companies that are covered
and maintains the list, based on the best by the Transition Pathway Initiative (and
available data and assessments of align- therefore have an SDA benchmark), they
ment to the Paris agreement in fossil fuel will be put on the list if they have emissions
sectors. The main data source for this is the targets that are aligned with 2°C or less, and a
Transition Pathway Initiative (TPI), whose climate governance rated at 3 or higher.
assessments are publicly available at https://
www.transitionpathwayinitiative.org/. TPIThe main data source is For companies that are not covered by TPI As an example of such an override, TPI’s
Transition Pathway Initiative and for which no SDA benchmark exists, assessment of Eversource Energy indicates
the Nordea Responsible Investments team non-alignment with 2°C, but this has not
TPI assesses companies’ forward-look- will assess the companies based on internal been updated to reflect Eversource’s recent
ing targets and strategies for alignment research and climate data from other pro- and complete divestment of fossil-based
with a 2°C global warming scenario viders, which will serve as a proxy for SDA power generation assets. The RI team there-
- Publicly available research
- Widely recognized as gold standard
based alignment assessments until relevant fore added Eversource to the list despite the
SDA based assessments are possible. These negative TPI assessment.
assessments are generally more qualitative
in nature, but are necessary to identify the For issuers that are fully or mainly state-
issuers that would be counter-productive owned, the RI team may choose to evaluate
for the objectives of the Paris Agreement the issuer’s performance against the Paris
to exclude. The main parameters for these Agreement based on the alignment of the
assessments are: sovereign’s climate strategy with the 2°C
target.
1. The company should have a business mod-
el that promotes the fulfilment of the Paris
Agreement’s climate objectives (where the Which companies are on the Paris-Aligned
business model is defined as a combination Fossil Fuel list?
of products and services)
The list will continuously grow over time, as
For companies that are not covered by the Transition Pathway Initiative, but for which SDA 2. The company should have sound climate more companies devise Paris-aligned tran-
benchmarks exist, the Responsible Investments team will use alternative data sources to as- risk management sition strategies, and also as more and more
sess the company’s alignment with the same benchmarks as TPI uses. Notably, the electricity companies are assessed by the RI team.
utility sector contains many such companies. For this sector, emissions intensity data from ISS 3. The company should have ambitious emis-
ESG, and a climate governance quality assessment from CDP is used. sion reduction targets Given the current state of transition in the
energy sector, the list contains no companies
Additionally, where a quantitative screening with more than 5% of revenue from oil and
PAFF List criteria for the electricity utility sector is performed, the RI team may choose to gas extraction or coal mining.
override this screening if the assessment
from TPI or other providers is found to not
be appropriate. Generally, these overrides
should only be made if:
• The RI team finds that the service provid-
er’s assessment of the issuer’s performance
against the specific criterion that they fail is
based on inaccurate, incomplete or outdated
information;
NB: Utilities withAs of 9 February 2021, the PAFF List contained the
following issuers:
• A2A SpA • Consolidated Edison Inc • ENN Energy Holdings Ltd • National Grid PLC
• AES Andres BV / Dominican Power • Consumers Energy Co • Entergy Arkansas LLC • Naturgy Capital Markets SA
Partners / Empresa Generadora de • Contact Energy Ltd • Entergy Corp • Naturgy Energy Group SA
Electricidad It • Delmarva Power & Light Co • Entergy Louisiana LLC • Naturgy Finance BV
• AES Argentina Generacion SA • Dominion Energy Inc • ERG SpA • Neoenergia SA
• AES Corp/The • Dominion Resources Capital Trust I • Eversource Energy • Neste Oyj
• AES El Salvador Trust II • DTE Electric Co • Exelon Corp • New Jersey Resources Corp
• AES Gener SA • DTE Energy Co • Exelon Generation Co LLC • NextEra Energy Capital Holdings Inc
• AES Panama SRL • Duke Energy Carolinas LLC • First Gen Corp • NextEra Energy Inc
• Alabama Power Co • Duke Energy Corp • First Philippine Holdings Corp • NextEra Energy Operating Partners LP
• Alimentation Couche-Tard Inc • Duke Energy Florida LLC • Florida Power & Light Co • NextEra Energy Partners LP
• Alliant Energy Corp • Duke Energy Florida Project Finance • Fomento Economico Mexicano SAB de • NGG Finance PLC
• Arizona Public Service Co LLC CV • NiSource Finance Corp
• Astra International Tbk PT • Duke Energy Ohio Inc • Fortum OYJ • NiSource Inc
• AusNet Services • E.ON International Finance BV • Fugro NV • Northland Power Inc
• AusNet Services Holdings Pty Ltd • E.ON SE • Georgia Power Co • NRG Energy Inc
• Avangrid Inc • Edison International • Grupo Energia Bogota SA ESP • Orsted AS
• Baltimore Gas and Electric Co • EDP - Energias de Portugal SA • Gulf Power Co • Pacific Gas and Electric Co
• Beijing Enterprises Holdings Ltd • EDP - Energias do Brasil SA • Hera SpA • PECO Energy Co
• Beijing Jingneng Clean Energy Co Ltd • EDP Finance BV • Hexagon Composites ASA • PG&E Corp
• Belgelec Finance SA • Electrabel SA • Iberdrola Finance Ireland DAC • Pinnacle West Capital Corp
• Boston Gas Co • Electricite de France SA • Iberdrola Finanzas SA • PSEG Power LLC
• Brooklyn Union Gas Co/The • Elering AS • Iberdrola International BV • Public Service Co of Colorado
• Burckhardt Compression Holding AG • Empresa Electrica Angamos SA • Iberdrola SA • Public Service Electric and Gas Co
• Canadian Tire Corp Ltd • Empresa Electrica Guacolda SA • Infraestructura Energetica Nova SAB • Public Service Enterprise Group Inc
• Centrica PLC • Endesa SA de CV • REN - Redes Energeticas Nacionais
• CEZ AS • Enel Americas SA • innogy Finance BV SGPS SA
• China Gas Holdings Ltd • Enel Chile SA • Innogy SE/DE • Ren Finance BV
• China Longyuan Power Group Corp Ltd • Enel Finance International NV • Interstate Power and Light Co • Rotork PLC
• China Resources Gas Group Ltd • Enel Generacion Chile SA • IPALCO Enterprises Inc • RWE AG
• China Suntien Green Energy Corp Ltd • Enel Generacion Peru SAA • Iren SpA • Ryder System Inc
• Cia Energetica de Minas Gerais • Enel Investment Holding BV • Jiangsu Expressway Co Ltd • SCANA Corp
• Cia Paranaense de Energia • ENEL RUSSIA PJSC • KeySpan Gas East Corp • Scottish Power Ltd
• Clean Energy Fuels Corp • Enel SpA • Kroger Co/The • Scottish Power UK PLC
• Clearway Energy Inc • Engie Alliance GIE • Linea Group Holding SpA • Sichuan Expressway Co Ltd
• Clearway Energy Operating LLC • Engie Brasil Energia SA • Mississippi Power Co • SNC-Lavalin Group Inc
• CMS Energy Corp • Engie Energia Chile SA • Narragansett Electric Co/The • Southern California Edison Co
• Consolidated Edison Co of New York Inc • Engie SA • National Grid North America Inc • Southern Co Gas• Southern Co Gas Capital Corp
• Southern Co/The
• Southern Power Co
• Southwestern Public Service Co
• SSE PLC
• Subsea 7 SA
• Teollisuuden Voima Oyj
• Towngas China Co Ltd
• TransAlta Corp
• TransAlta Renewables Inc
• Vattenfall AB
• WEC Energy Group Inc
• Virginia Electric and Power Co
• Wisconsin Electric Power Co
• Wisconsin Power and Light Co
• Wisconsin Public Service Corp
• Xcel Energy Inc
Read more about responsible investments in Nordea:
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