Velliv’s view on fossil fuel investments
Velliv's view on fossil fuel investments
Responsible investment
The world needs to transition from fossil fuels to renewable energy if we are to achieve the goals of the Paris Agreement. This is a goal that Velliv wholeheartedly supports.
A complete phasing out of fossil fuels will take many years, as oil and natural gas remain necessities for now, and a transition will require both companies and society to undertake major changes. However, the International Energy Agency (IEA) already concluded in 2021 that there is no need for investment in new fossil fuel reserve development if we are to meet the CO2 emission reduction targets set out in the Paris Agreement.
A number of utility companies have embraced the green transition and replaced fossil fuels with green alternatives. However, we have not seen the same for fossil fuel companies. In stead, they have failed to contront the seriousness of the situation. The same is true for some energy companies, despite investors endeavouring to push them in a more sustainable direction through active wonership and dialogue. Den grønne omstilling lader også vente på sig hos flere energiselskaber – også selvom investorer gennem aktivt ejerskab og dialog har forsøgt at påvirke dem i en mere bæredygtig retning. For example, it seems unrealistic to expect companies whose business model is based on extracting fossil fuels to completely overhaul their core operations simple as a result of dialogue, were we try to influence them in a more sustainable direction.
This is why we do not view engaging in dialogue with these companies as a meaningful tool for influencing the green transition. Therefore, we exclude companies that are involved in the exploration and extraction of oil and gas or the use of coal, oil and gals for energy production – unless we assess that they have implemented concrete initiatives and measures that indicate a credible green transition.
'Fossil fuel companies' refers to companies involved in activities related to fossil fuels
They are categorised into five groups:
1
Companies that seach for new oil, natural gas or coal (also known as 'exploration') and/or extract these resources from the ground (also known as 'production'). These activities are also referred to as 'up-stream' activities.
2
Companies that act as intermediaries between upstream and downstream activities,such as transporting or storing fossil fuels. These activities are also referred to as 'midstream' activities.
3
Companies that refine fossil fuels into various products such as gasoline or jet fuel and market, distribute and sell these products to end users. These activities are also referred to as 'downstream' activities.
4
Utility companies that generate electricity using fossil fuels, such as coal- or gas-fired power plants.
5
Service companies that provide services to companies with upstream, midstream and downstream activities, such as drilling functions or consulting services.
What does Velliv's investment strategy entail regarding the fossil fuel sector?
Our investment strategy for the fossil fuel sector includes power generation companies and upstream companies. It is crucial to stop new extraction of fossil fuels. We believe that we can contribute to this by focusing on those companies that are involved in the extraction of, and energy production based on, fossil fuels.
At Velliv, we do not invest in fossil "upstream" and power generation companies unless they are assessed as being in a credible green transition. This means concretely: we do not invest in companies where more than 5% of revenue comes from exploration, extraction and production of oil and gas, or the use of thermal coal, oil and gas in energy production, unless Velliv assesses that the companies have ambitions to achieve the Paris Agreement.
However, there are some fossil fuel companies that we have chosen to exclude entirely. These include:
- companies where more than 5% of revenue comes from extraction of thermal coal.
- companies with any revenue from extraction of thermal coal or coal in energy production that also have plans for thermal coal expansion.
- companies where more than 5% of revenue comes from extraction and production of oil and gas using unconventional methods, including tar sands, arctic drilling and fracking.
As a consequence, several companies are excluded from our investment universe. This includes large energy companies that still have plans to extract larger amounts of fossil fuels from the ground in the future.
We do not expect our approach to solve global warming. However, we hope that transparency and focus will spread like ripples around the world and change attitudes on this issue, so that over time, we can again include more of the excluded companies in our investment universe.