2018 NextGen

Pelle Pedersen is the head of responsible investments at the Danish pension fund PKA, and known as one of the most distinctive voices on sustainability. In 2017, PKA coauthored a report that received international attention, about “how much capital the biggest oil and gas companies potentially are wasting in a low-carbon world.” It led to 35 divestments (a first for pension funds in Denmark) and 15 companies on the watch list. To Pedersen, investing with sustainability in mind is the best way to deliver long-term shareholder value. The World Wildlife Fund has ranked PKA as the most climate-friendly pension fund in Denmark four years in a row, and, last year, the PKA scored the rank of the 13^th most climate-friendly investor in the world by the Asset Owner Disclosure Project.

Pedersen says we need investment solutions to help to reverse the unsustainable trajectory of the world at large. He questions whether the United Nation’s Sustainable Development Goals will spark a reallocation of capital. He is watching to see how much China will green its investment climate for the sake of the environment.

Pedersen, who has a master’s degree in law with a heavy emphasis on responsible investing from the University of Copenhagen, started his career as an associate for responsible investments at PKA in 2012, became analyst, and then head of investing.  He plans to leave PKA in August to move toward venture capital to the theme of impact investing. “I will, with three other partners, launch a new company advising and investing in Nordic impact startups trying to solve the sustainability challenges we are facing,” Pedersen said.

CIO: What are the accomplishments you are most happy to have achieved recently, and why?

Pedersen: I am particularly proud of one accomplishment related to our work with climate change risk. The majority of investors understand the notion of climate change risk. New technologies, public policy, and change in consumer patterns will inevitably change how energy and products are produced, used, and recycled. But how much risk at the company level are asset owners exposed to is the difficult question. How do we quantify climate change risk? In 2017, PKA and four European investors alongside Carbon Tracker and Principles for Responsible Investment (PRI) published the first report showing how much capital the biggest oil and gas companies potentially are wasting in a low-carbon world. The report received wide attention from NGOs, international media, and most importantly, from our beneficiaries. Following the results put forward by the report, additional engagement led PKA to divest from 35 oil and gas companies, place 15 companies on the watch list, and maintain 12 companies in the investment universe. 

 What are the accomplishments you are most happy to have achieved recently, and why?

I am particularly proud of one accomplishment related to our work with climate change risk. The majority of investors understand the notion of climate change risk. New technologies, public policy, and change in consumer patterns will inevitable change how energy and products are produced, used, and recycled. But how much risk at the company level are asset owners exposed to is the difficult question. How do we quantify climate change risk? In 2017, PKA and four European investors alongside Carbon Tracker and Principles for Responsible Investment (PRI) published the first report showing how much capital the biggest oil and gas companies potentially are wasting in a low-carbon world. The report received wide attention from NGOs, international media, and most importantly from our beneficiaries. Following the results put forward by the report, additional engagement led PKA to divest from 35 oil and gas companies, place 15 companies on the watch list, and maintain 12 companies in the investment universe.  

What would you be most excited to accomplish in the year ahead, and why?

I have a particular focus on impact investing, e.g., investments where the intention is to combine a societal impact with financial returns. The market has been growing, particularly the last three years, but is still not at the level where large institutional investors are allocating a substantial amount of capital to the segment. New innovative partnerships between investors, governments, development institutions, philanthropic capital, etc. are essential to scale impact investing and I see too many investors, governments, and organizations talking about creating impact without actually questioning what that means. It is not enough to look at what you already are doing and map those activities and investments against, for example,  the Sustainable Development Goals. If we all did that, nothing would change. The question is; will the SDGs lead to a reallocation of capital. That is the debate I would like to spark between investors, governments, and companies.

 What’s the most rewarding aspect of being an asset owner?

As an asset owner, you have the power to both influence companies to adopt to more sustainable business practices but also to have a substantial societal impact by investing in areas like  microfinance, wind parks, and developing countries. If we are to change our current way of doing business, we need companies that dare to show the necessary leadership and show sustainability is still just business—just in different terms—and is the best way to deliver long-term shareholder value. By influencing companies to cease the business opportunities within sustainability, we equally support our ambition to ensure stable returns to our 300,000 members from the healthcare and welfare sector, which will enable them to enjoy their retirement.

What’s the most challenging?

Too many of us are takers in the financial industry. In a crowd of voices where the majority is taking, we should all be trying to give as much value as humanly possible in order to accelerate an emergence of new financial products, projects, and business strategies supporting sustainable development. We all benefit by giving in the end, so why not start now instead of [being] about the here and now.  

 What are you most hopeful about in the future of the industry?

The race to the top has finally hit the investment industry when it comes to sustainable investment. It is a race to the top with hundreds of detours where we are all trying to figure out the why, how, and what. The investment industry has real power to form the society we live in, which in turn makes me hopeful for the future when billions of dollars are allocated into sustainable investment. The industry is still struggling to define what ‘sustainability’ is, but we are, without question, better off than we were three years ago.

  What are you most cautious about?

N/A

As a leader, what are the most important aspects of the industry you hope to change over your career?

To break through the noise, by definition, you have to do something fundamentally different than what everybody else is doing, and the majority is doing the same thing. We have the answers to solving the extensive sustainability challenges we are facing, we are just not deploying them into our decisions because it is not in our short-term financial and political interest. In my view, the industry is still driven by short-term metrics lacking truly long-term perspectives. If you bet on waking up in the morning by 2030, why not invest as if it were 2030? Particularly when looking at new sustainable mega trends—why has the industry been so slow in developing new financial products enabling investments in companies and services delivering the solutions needed to reverse the unsustainable trajectory we are on? I hope to inspire the industry to understand why the financial industry from a pure business perspective should show the necessary leadership unlocking the growth potential in building new and sustainable solutions.

   If you had one piece of advice for your peers, what would it be? If you bet on being here by 2030, invest as if it were 2030.

What are the biggest current trends you are seeing that have surprised you?​

The pace of which China has accelerated its investments in greening its economy I believe has caught most people by surprise, including me. The green dragon is coming and will be an inspiration for the rest of the world and highlight how fast one could shift an entire economy if the willingness is there.