US$20bil fund reveals savings after dumping oil before rout

The fund took the first major step toward cleansing its portfolio of oil stocks back in 2019, when it sold stakes in ExxonMobil, BP, Chevron, PetroChina, Rosneft, Royal Dutch Shell, Sinopec, Total, Petrobras and Equinor, worth a total of 644 million kroner (US$93mil).

COPENHAGEN: MP Pension, which oversees about US$20bil from its base north of Copenhagen, decided last year to do its bit to save the planet by exiting some of the biggest oil producers in the world. The focus on climate change ended up saving it a lot of money.

Chief investment officer Anders Schelde’s call to dump almost US$100mil worth of fossil-fuel stocks in September has already boosted MP’s portfolio by US$40mil, he says. The fund has since continued to purge its portfolio oil stocks, and is urging other investors to do the same, he says.

“We see the oil price dropping even further over the coming months, as the economic downturn continues to unfold, ” Schlede says. There’ll probably be a rebound in about three to six months that “might be tempting to jump on”.

But Schelde says MP is betting “oil companies won’t be a good long-term investment”.

The fund took the first major step toward cleansing its portfolio of oil stocks back in 2019, when it sold stakes in ExxonMobil, BP, Chevron, PetroChina, Rosneft, Royal Dutch Shell, Sinopec, Total, Petrobras and Equinor, worth a total of 644 million kroner (US$93mil).

The decision has already saved MP 266 million kroner, Schelde says.

This week’s historic collapse in the price of oil has entirely altered the investing landscape, as a global economic crisis triggered by Covid-19 collides with oversupply. Europe’s Stoxx 600 oil and gas index has lost more than a third this year.

MP, which mainly invests on behalf of academics, is now looking for alternatives to oil to fill its 33 billion-kroner stock portfolio.

The “demand shock” caused by the Covid-19 pandemic is also affecting green energy and unlisted alternative energy investments are currently on “standby” in this market, Schelde says. That’s because there’s little fund-raising going on, while physical meetings needed for proper due diligence aren’t possible with everyone working from home.

But for green energy, the setback should be over in five to ten years, making it an attractive investment now, Schelde says.

“Looking at it long-term, on one hand, you might fear it will be difficult to find political backing for financing the green transition, ” he says.

“But on the other hand, the building of green infrastructure might just be good fiscal stimulus in a challenged macro economy.” — Bloomberg