Big Danish Pension Fund to Trim Fossil Fuel Investments

Danish pension provider ATP is pledging to stop allocations of capital toward fund managers who have exercised an interest in investments in companies that help push the fossil fuel industry forward, said the pension’s environmental, social, and governance (ESG) chief, Ole Buhl, in a conversation with Reuters.

The institutional investor has approximately $133 billion in assets and is regarded as one of Europe’s largest funds—thus making a strong statement for the sustainable investment movement.

The fund gains roughly half of its exposure to fossil fuel investments through externally managed funds in asset classes such as private equity and private credit.

“Buhl said the risk of some fossil fuel assets becoming stranded amid a rapid transition to clean energy was a risk, pushing it to stop investing in private equity and credit funds which invest in fossil fuel assets. However, ATP cannot pull out of the funds it has already invested in, meaning there would be a phase-out period,” Reuters reported.

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Buhl’s statements come in the same week as ATP reported its best-ever annual result in its 2019 financial report. The fund generated DKK 40.7 billion ($5.98 billion) representing a 39.7% net return, with government and mortgage bonds spearheading the return profile. Returns for the previous four years clocked in at -5.9%, 28.4%, 15.2%, and 16.4%.

“For all ATP investments, some degree of effect on one or more of the United Nations’ 17 sustainable development goals will be evident,” the fund said in its 2019 annual report.

Buhl said to Reuters that the fund will engage in shareholder activist-related motions with the companies that have relatively high carbon dioxide emissions in their portfolio and attempt to persuade them to change their approach.

ATP’s intentions make them part of a growing movement of ESG-minded institutional investors looking to decarbonize their portfolios. Investors left with fossil fuel investments after their peers have moved to renewable sources of energy may be at risk.

The New York State Common Retirement Fund, Netherlands’ ABP fund, and a cohesion of pension plans based in London recently announced that they will adopt clear and concise strategies to ramp up their investments in sustainable and renewable energy-related companies.

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Tags: ATP, ESG, Fossil Fuel Investments, Pension Funds, Private Credit, Private Equity, Sustainability

When it comes to artificial intelligence, the most important thing is to start investing now, says W.K. Kellogg Foundation’s investments director, Neal Graziano. And that’s exactly what his organization is doing, along with the Robert Wood Johnson Foundation, institutional investor network Trusted Insight, and European family offices.

Together, the groups have directed a $27 million investment, announced last week, into a German venture capital firm that seeds machine learning companies.

Founded in 2016, the Berlin-based Merantix is a lean operation. But it has already built three European companies, including Vara, which is Germany’s first approved AI software for cancer screening and is touted to have a better accuracy rate than radiology. The venture startup also has a company working with Volkswagen to build features around automated driving technology.

“For us, it’s most important to start. We need to start investing, across different industry sectors, where AI is playing more of a role,” said Graziano, director of investments at W.K. Kellogg, founded by the creator of the cereal company.

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Foundations like his and Robert Wood Johnson (begun by the family that started the Johnson & Johnson health care giant), have deep pockets and could be partnering with more-established venture capital firms. But Graziano said he was interested in an early-stage strategy that was more local and could anticipate the next big thing in the industry. His consortium just needed the right long-term partner.

Merantix fit the bill in more ways than one. W.K. Kellogg was attracted to the startup’s work culture, including its open architecture infrastructure, meaning entrepreneurs across different companies within Merantix can access and share the same code, data, and insights.

“It creates a natural culture of sharing and teamwork across organizations that we generally don’t see,” Graziano said. “We anticipate that this partnership will go through a cycle. They may be friendly now when times are good and we want to make sure that they’ll be there when the tough times come.”

Graziano said the startup also stood out for its low churn rate and its ability to recruit talent from across the globe. That’s something the investing director attributed to Merantix’s co-founders, which includes deep learning researcher Rasmus Rothe, who has published more than 15 academic papers on the subject.

“If you’re in the AI field, you’ve come across some of his work, so just having somebody like that at the head, people enjoy and are honored to work in a team like this, so even if the firm is small, they’re able to punch above their weight,” Graziano said.

On artificial intelligence investments, the Kellogg investment chief cautioned patience around AI, likening it to the early days of the internet, which went through a quiet stage before birthing tech behemoths such as Amazon, Facebook, and Google.

While the investments carry inherent risk, most companies that come out of the VC incubator have starting valuations of under $10 million. If the venture doesn’t work out, then the well-heeled investors have lost out on relatively little. But if it does work out, the payout could be huge for the firm and the investor.

Said Graziano: “We expect some of the highest returns in a strategy like this.”