The Dutch pension fund provider has voted in favour of several Paris-aligned resolutions this AGM season, as it prepares for engagement with policymakers and fossil fuel consumers on climate action.
PGGM will begin exploring how to engage with policymakers on climate action, as it ramps up voting at oil and gas majors on climate action and starts an engagement programme with the biggest consumers of fossil fuels, Andres van der Linden, Climate Active Ownership Lead at the Netherlands-based pension provider, told ESG Investor.
Last week, PGGM voted in favour of the Follow This resolution at BP asking for alignment with the Paris agreement or its mid-term targets, with the Dutch institutional investor planning to also vote in favour of the same resolution at Shell’s AGM on 23 May. PGGM also voted against the re-election of incumbent board members of Marathon Petroleum Corporation and Valero Energy last week.
“We want to encourage greater climate action at these companies,” said Van der Linden, adding that PGGM plans to divest all its oil and gas holdings that fail to put a Paris-aligned strategy in place by the end of the year.
“Although European oil and gas companies are generally industry-leading in their efforts, we have not been convinced that they are aligned with a 1.5°C degree warming pathway.”
To complement its efforts in this respect, PGGM commissioned a report on European oil and gas major’s alignment with 1.5°C with fellow Dutch investors Achmea Investment Management, APG Asset Management, MN and Pensioenfonds Rail & Openbaar Vervoer.
The research, written by Accela Research, shows that while European energy majors are leading the rest of the industry, it estimates that, on average, company portfolios will remain 82% in oil and gas production, compared to 18% in low-carbon alternatives by 2030.
It also finds that it is unable to verify the 1.5°C alignment of any European oil and gas major.
“Although many oil and gas companies have their own methodologies to show alignment with 1.5°C, they do not provide sufficient disclosure to allow investors to replicate their approach,” said Van der Linden. “Investors need to understand exactly which IPCC scenarios are being used as benchmarks, as there is a risk of cherry-picking the scenarios that best suit your climate plan.”
He added that when oil and gas companies only set carbon intensity targets, they had to explain how this impacts absolute emissions, with greater disclosure needed on renewables and low-carbon generation and production targets.
Engagement with consequences
PGGM will use the findings of the report to inform its engagement efforts and its voting decisions. It has co-filed a resolution with Follow This and 17 other investors at French majorTotalEnergies, which will have its AGM on 26 May.
On behalf of Dutch pension plan Pensioenfonds Zorg en Welzijn (PFZW), PGGM started a two-year oil and gas engagement programme in 2022. Over the past 18 months, PFZW divested 192 oil and gas companies that did not show a sufficient willingness to transition towards an energy company aligned with the goals of the Paris Climate Agreement. The 94 oil and gas companies left in PFZW’s portfolio have until the end of 2023 to draw up a verifiable energy transition strategy in line with a Paris-aligned 1.5C pathway.
The companies that fail to do so will be divested.
Further, Van der Linden said in the second half of 2023 PGGM will begin exploring how it can get involved in policy engagement to complement its corporate engagement programmes on climate action. It has also started an engagement programme with the biggest consumers of fossil fuels.
“By tackling both the supply and demand side of energy we can ensure a balanced transition towards a low-carbon energy system,” he said.