Denmark’s biggest commercial pension fund PFA has revealed that its climate-tilted pension product ended 2024 with a higher return than the standard pension product, and its CIO is optimistic that last year’s equities bull run could continue in 2025.
The DKK778bn (€104bn) pension fund said its market-rate product PFA Klima Plus – which has stricter climate-related exclusion criteria than PFA’s standard market-rate product PFA Plus – produced a 19.6% return for 2024, measured a few days before the end of that year.
Meanwhile PFA Plus had generated a return of 13.9%, based on the recommended profile C, PFA said.
Kasper Ahrndt Lorenzen, group CIO of the Copenhagen-based pensions firm, said that despite a turbulent world with continued wars and conflicts, the economy had basically done well in 2024, with inflation having slowed, interest rates having come down while employment continued to be high.
Lorenzen said: “This is true, not least in the US where stock markets have been in record spirits for the same reason.
“PFA’s customers have benefited from this, as we’ve been solidly invested in the US, including in some of the large US technology companies that have driven progress, just as in 2023.”
In an end-of-year commentary from the firm, Lorenzen noted that customers with savings in the climate product had received a higher return than that gained from the broad investment product.
“This is strong in a year when part of the green sector has been hit by declining investment appetite,” the CIO said.
“The good return has been achieved while we have fulfilled our ambition for the portfolio’s CO2 footprint to be 60% below the average for world equities,” he added.
Looking ahead to the new year for equities in general, PFA said that although returns had outpaced the historical average by far in the last two years, this did not necessarily mean the bull run was over.
As long as the economy was healthy and companies reported progress in earnings, the CIO said there was reason to remain optimistic.
“Historically, at least, there is no evidence that fixed expiry dates should be set on equity gains,” said Lorenzen.
“On the contrary, history shows that they can be quite resilient and last for several years,” he added.
PFA is making changes to the investment criteria for PFA Klima Plus from 1 April this year, from which date it will exclude stocks with a strong connection to the fossil-fuel sector – in addition to oil, coal and gas companies themselves.
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