ABP’s sudden decision to part ways with fossil fuel producers had suggested that the Dutch civil service regime quickly lost confidence in its ability to steer these companies towards a carbon-neutral future.
As ABP loses its seat on the table, its exit could be a red flag to other shareholders and fossil fuel companies.
As recently as May, ABP proudly published a press release on its website saying that “constructive discussions” with Shell on reducing carbon emissions have yielded “results.”
But five months later, the fund announced it would sell its â¬ 600 million stake in Shell along with its stock and bond allocations to all other oil and gas majors.
ABP’s turnaround from the fossil fuel sector surprised many, especially those who had campaigned for ABP’s divestment from the industry.
“We expected some sort of announcement in the run-up to COP26, but not this one,” said Liset Meddens, director of Fossil Free Netherlands. Fossil Free was set to sue ABP over its fossil fuel investments, but has now put the case on hold.
Mark van Baal of Follow This, a campaign group calling on fossil fuel companies to improve their climate policies through shareholder resolutions, called ABP’s divestment decision “crude and inexplicable,” but he said. was not disappointed. “We don’t regret that ABP is selling its shares because they never backed any of our resolutions.”
Other investors also find ABP’s sudden shift from a cautious commitment to divestment surprising, but believe it is part of a larger trend. âI would say this reflects a movement of many clients in this direction,â said Eric Christian Pedersen, responsible investment manager at Nordea Asset Management.
According to Raj Thamotheram, former ESG head of the UK’s Universities Superannuation Scheme and currently independent consultant and market commentator, ABP’s divestment decision illustrates that “the half-hearted commitment to tea and cookies” is doomed to ‘failure.
He said: âI hope this will be a wake-up call for this fund and all of its peers to dramatically raise their level of play. Either be true energetic stewards or give in fully and quickly with a public announcement. “
It remains to be seen whether ABP’s divestment decision will be more effective than the tea and cookie pledge. Lars Erik Mangset, chief climate change adviser at Norwegian pension investor KLP, supports the move, although he added that KLP has no plans to divest from fossil fuels entirely, noting that KLP has already completely withdrawn from coal and oil sands. Activities.
He said: âWe welcome this decision, acknowledging that at present it is really not clear what are the best measures to impact the real economy to move to the necessary level. We also see clear advantages in this strategy. “
However, he explains that âone might get the impression that KLP is categorically opposed to divestments, this is not the case. In fact, we probably have the widest range of exclusion criteria in Norway. But we stand by our comment, that we remain invested in oil and gas because we want to see if we can help push companies to transition. If this is unsuccessful, then over time divestment could become relevant. “
“I hope this will be a wake-up call for this fund and all its peers to considerably raise their level of play”
Raj Thamotheram, former ESG manager of the Universities Superannuation Scheme in the UK
While the United Nations Environment Program Finance Initiative noted in a recent article that divestment “removes the ability of investors to exert influence,” Pedersen of Nordea AM noted that a divestment decision, in especially when it comes from an investor as large as â¬ 528 billion ABP, “sends a clear message to companies that change is needed”.
Impact of divestment
Although theoretically investors who aspire to change see their numbers wither if some decide to divest, it could also embolden them. Speaking at a pre-COP26 IPE workshop on Thursday, Pedersen said the asset manager had his own experience of the immediate impact of divestment when he sold a Brazilian meat packing company after the The commitment has been unsatisfactory for a long time.
âWhat happened right after was that they made concessions to investors who were still invested,â he said, âso I think there’s a certain point of view that you can have, which I think I share personally, that if some leave these companies, it will be easier for others to get involved â.
He added: “Of course, where it is a little different, maybe it is in the vote, and we have seen the Exxon case (proposal 6 at the Exxon AGM this spring for a” scenario analysis report “which only failed by about 1%) where the votes were very tight. There you might have wished for a few more progressive investors in Exxon who could have tipped the scales. So for me , the jury still does not know which is the best approach. “
ABP said it will now focus its engagement efforts on companies that are heavy users of fossil fuels, such as airlines and car manufacturers.
According to KLP’s Mangset, ABP is “absolutely right to take the demand-side approach, as it is probably a much more effective and efficient way to transition into the economy.”
The big question now is what ABP has learned from its unsuccessful journey of engagement with fossil fuel companies, and how it will apply those lessons in the future.