KENFO, a German public law foundation tasked with managing assets to fund nuclear waste disposal, has pushed back against an allegation that it has expanded investments in new fossil fuel production.
The environmental campaign group Urgewald shared a new analysis last week, stating that the €24bn fund’s investments in the fossil fuel industry had increased by 3.4% or €791m between 2023 and 2024.
KENFO was established in 2017 in the wake of the Fukushima disaster, with contributions by Germany’s nuclear power plant operators who had been mandated to support the fund. Its mission is to cover the cost of nuclear waste disposal in Germany, estimated to range between €20bn and €170bn by the end of the century. With no suitable final repository site yet identified, and nuclear waste remaining radioactive for more than a million years, KENFO is by definition a long-term investor navigating a challenging return target.
Just over a third (35%) of the fund’s portfolio is currently invested in the stock market, 25% in higher-yielding bonds, 10% in sovereign debt and a further 30% in illiquid assets.
Campaigners highlight that many of the 114 energy firms in KENFO’s portfolio, including TotalEnergies, BP and Shell, are currently expanding their production of fossil fuels, despite IEA warnings that no further production capacity of oil and gas is needed if the world is to meet the targets set in the Paris Agreement.
Fossil fuel exposure
Urgewald’s report is based on 2024 portfolio data disclosed by KENFO and highlights that the foundation has invested around €58m in Shell, €52m in TotalEnergies and €45m in BP. These disclosures have been compared with Urgewald’s internal databases on the coal and gas industry.
While the campaign group welcomes KENFO’s commitment not to invest in firms that derive more than 5% of their revenue from coal, it also points out that some of the firms in the foundation’s portfolio, notably Sasol Ltd, Xinyi Glass Holdings Ltd, Vedanta Resources Ltd, Idemitsu Kosan Co Ltd, Mitsubishi Corporation, POSCO Holdings Inc and Hindalco Industries Ltd, are currently pursuing coal expansion.
Campaigners are now urging the foundation to divest from firms that pursue fossil fuel expansion. “By purely focusing on CO2 intensity, the KENFO management is taking the easy way out. This fails to take into account fossil fuel expansion plans of firms it is currently invested in. By purely focusing on carbon intensity metrics at portfolio level, KENFO can continue to back companies that are unwilling to transition and are jeopardising the future of our climate. It should be clear that firms that are expanding fossil fuel production are a no-go for any climate-conscious investor, particularly one acting in the public interest,” said Kathrin Petz, finance campaigner at Urgewald.
Real-world impact
When approached for comment by Net Zero Investor, KENFO disputed the findings. A spokesperson for the firm said that it remains unclear how the campaign group derived the figure of a 3.4% increase. “Our internal analysis shows that both in terms of exposure to specific stocks as well as in terms of their market capitalisation held by KENFO, the period between 2023 and 2024 has seen a decline,” they said.
KENFO suggests that the allegations highlight a lack of transparency on methodology and research assumptions. “We noticed, among others, that Urgewald’s publicly available Global Oil & Gas Exit List 2024 includes Microsoft as a fossil fuel firm, presumably due to its intention to cover part of its company-level energy consumption through a gas plant in Ireland. But this raises questions on the methodology employed by Urgewald. For KENFO, in line with the prevailing market view, only those companies can be considered fossil fuel companies that generate revenue in the market from the extraction of fossil resources or the production of electricity from fossil energy. Companies like Microsoft, which produce electricity solely for their internal energy consumption, therefore cannot be regarded as fossil fuel companies.”
The foundation also said that it is engaging with energy firms on the phase-out of their most emission-heavy and riskiest business segments such as coal production. However, it argues that a complete divestment from these sectors would be meaningless in terms of real-world impact as other investors with less concern for the planet would simply buy these assets.
KENFO also responded to Urgewald’s pledge to divest from firms that expand fossil fuel production, describing this approach as “not feasible.”
“While KENFO can decide for or against certain business activities by participating in a specific infrastructure project, it does not have this option when purchasing company shares or bonds. Moreover, investments in the energy sector serve to stabilise the portfolio during geopolitical crises, such as the war in Ukraine, and to provide protection against inflation, as the share prices of oil and gas companies have historically performed better than the overall market in such times. Under the Nuclear Waste Management Fund Act, KENFO is obliged to achieve the highest possible return at an appropriate level of risk. Therefore, it cannot forego this source of return,” the foundation said.
The disagreement between KENFO and environmental campaigners comes amid an emerging debate on the role of firms with fossil fuel expansion plans in net zero portfolios. Last week, the SBTi set out its guidelines for financial institutions with exposure to the fossil fuel industry. These include an expectation to cease all new financing of coal projects, and to phase out financing of any new oil and gas projects by 2030. Institutions are also expected to immediately halt the expansion of existing fossil fuel assets. While KENFO is not a signatory of the SBTi, the dispute over its fossil fuel assets highlights the increasing pressure asset owners with net zero commitments face.
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