Allocators

Sweden’s AP Funds Forge Ahead on Sustainable Investing

Stockholm (NordSIP) – Sweden’s cluster of AP buffer pension funds has been forging ahead with sustainable progressive investments, an overview from Investments & Pensions Europe finds.

  • AP2, which, as NordSIP has reported, has just invested USD 50 million in The Rise Fund, a private equity fund managed by TPG Growth which is aligned with the UN Sustainable Development Goals and whose purpose is to achieve quantifiably positive social and environmental outcomes alongside competitive financial returns, allocated 1% of its AUM to green bonds in 2016, making that asset class integral to its overall investment strategy. It is also continuing its investments in green and social bonds managed within its existing bond portfolio, with SEK 5.3 billion currently invested in green holdings.

 

  • AP3, IPE reports, had reduced its carbon footprint by 25% by the end of 2016, having set four guidelines covering carbon emissions, green bonds, green buildings and strategic sustainable investing. It claims its portfolio is now carbon neutral, due partly to investments in timberland, and it exercises active management to encourage investees to improve their own carbon footprints. AP3 has doubled investments in green bonds from SEK 4.5 billion in 2015 to SEK 9.5 billion, with plans to increase this to SEK 15 billion by 2018. AP3, as one of Sweden’s largest real estate investors, is also pioneering green buildings through energy saving and sustainable materials.

“We believe we can get the same returns from green bonds as from regular bonds,” according to Mårten Lindeborg, CIO and Deputy Chief Executive of AP3. “We would also like to make the market larger, and more transparent. There needs to be a standardised list of criteria for labelling green bonds so that investors can evaluate their sustainability.”

  • AP4 has also established a global low carbon strategies platform, consisting of three internally and three externally managed low carbon mandates, with 24% of its global equity portfolio presently invested in low carbon strategies. The fund has shifted towards corporates and financials from sovereign, supranational and agency bonds in the green bond space. AP4 has also developed “ECOBAR”, a system to measure and manage CO2 exposure across its credit portfolio. The fund’s strategy is to explicitly engage through corporate governance to safeguard shareholder value, including areas covering strategy, sustainability, board composition, capital structure, compensation and transparency. It also participates in nomination committees, which review issues like increased diversity on company boards, gender equality and effective board assessments.

“We believe sustainability is key, and a necessity for long term return performance,” says Pia Axelsson, AP4’s senior manager for corporate governance and communications. “In many economies, bank financing is the prevalent form of financing rather than capital markets, and the development of more bank issuance in the green space is viewed quite positively.” On CSR, Ms Axelsson maintains that “to be successful, dialogues are conducted with mutual trust between the parties and not, for example, through the media.”

Read IPE’s coverage of the Swedish pension funds, including commentary on their alternative investments and challenges, here.

 

 

Kames Capital
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