Case study: KLP’s active ownership journey

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Owned by its customers, KLP is Norway’s largest pension fund serving Norwegian municipalities and health companies.

Business type: Pension fund/Asset manager

Product: Essential Indicators with the PACTA Plug-In

Region(s) of operation: Global

Navigating the transition through active ownership

Norway-based asset owner KLP formally initiated its collaboration with Asset Impact in the fall of 2022 as a strategic step in its organization-wide mission to achieve net-zero emissions.

In 2021, KLP’s Board defined its updated climate strategy objectives, emphasizing a proactive approach in addressing high-emitting sectors. However, during this period, KLP identified a critical shortfall in their available data, particularly concerning Scope 3 emissions within their portfolio.

Recognizing the need for robust and comprehensive climate data to drive their active involvement in the transition as a responsible asset owner, KLP sought a data partner to help them improve data coverage for critical parts of their portfolio, as a basis for further analyses of the portfolio’s climate profile and possible measures.

"We aimed to be proactive and engaged in the transition journey. Right from the start, it was evident that Asset Impact had a leading edge in climate data, precisely addressing our data gaps," said Gjermund Grimsby, Chief Advisor, Climate Change at KLP.

"To effectively gauge the progress of the companies within our portfolio, especially concerning their climate goals, granular company-level data was imperative. Asset Impact's forward-looking data and company-level transition insights fulfilled our need for comprehensive data for portfolio companies in high-emitting sectors," he continued.

Measuring progress and engaging with portfolio companies

In its effort to measure the pace of transition among portfolio companies within high-emitting sectors, asset-based data was helpful in calculating the "Paris Alignment Percentage" of KLP’s portfolio. This metric indicates the portion of the portfolio on track to meet the Paris Agreement goal of limiting global warming to 1.5°C by 2050.

In 2020, KLP’s portfolio exhibited a 46% alignment, which then progressed to 54% by 2022. This positive shift was partially steered by the firm’s investment strategy, which mandates that the asset owner allocates at least six billion Norwegian kroner towards climate-friendly projects. Notably, in 2022, 10.2% of KLP’s portfolio comprised climate-friendly investments, with renewables accounting for 7%. By contrast, only 2.3% of KLP’s portfolio was invested in oil and gas.  

However, this overall progress was not only driven by changes in the organization’s capital allocation strategy, but also by improvements in data quality and coverage. “Our increased alignment with the Paris Agreement goals captures not only changes in the real economy, but also methodological advancements and better data. Thanks to Asset Impact’s data, we now possess a robust foundation for meaningful discussions on transition plans with our portfolio companies," said Grimsby.

Collaborating with investors for greater impact

As an institutional investor representing the interests of pensioners in Norway, KLP recognizes the imperative of limiting global warming for its customers and is actively engaged in coalitions with fellow investors to leverage collective influence.

“A lot of institutional investors like us have a similar agenda or incentives so building strong coalitions collectively enables us to influence our portfolio companies so that we not only encourage them to establish transition plans but also to execute them.”

KLP is part of several investor coalitions, such as the Climate action 100+ and Nature action 100, and is a signatory to the UN’s Principles for Responsible Investment. As a large investor in the Norwegian market, KLP has a particular interest in, and potential influence over, companies operating in high-emitting sectors in Norway.

“For example, Yara, one of our portfolio companies here in Norway, is one of the world’s largest producers of fertilizers. As one of the company’s shareholders, we have been asking questions about the company’s climate reporting and transition plans alongside other owners. Yara has made significant progress to date and is now one of the industry leaders with respect to their work on climate impact.”  

KLP's proactive and data-driven approach to addressing climate change has positioned the organization as a leader in responsible investment. KLP's journey towards a sustainable, net-zero emissions future serves as a model for other asset owners looking to make a meaningful impact on the climate crisis.

Learn more about KLP here.

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