Stockholm (NordSIP) – At the start of July, Alecta, Sweden’s largest pension provider with SEK1,100 billion in AUM, announced its first interim targets to reduce the Scope 1 and 2 carbon footprint of its listed equities and corporate bonds and its directly owned real estate by 25% and 50%, respectively.
The announcement was made as part of Alecta’s second climate report, which the pension provider published in accordance with the TCFD recommendations, as per its commitments as a member of the Net-Zero Asset Owner Alliance (AOA). Alecta has also been part of developing the Target Setting Protocolm, based on the latest international climate research and is currently one of the most ambitious climate guidelines for investors. The protocol requires members of the AOA to adopt reduction targets for 2025 that cover the three asset classes discussed by Alecta.
“We have very concentrated portfolios, mainly based on our own fundamental analysis. Our equity portfolio, as an example, only consists of around 120 companies. This means that we know what we invest in, and can use our ownership to engage, follow-up and support the companies we invest in to transition to a low-carbon economy,” says Peter Lööw, Head of responsible investment at Alecta.
Engagement-wise, Alecta announced it would engage in climate related dialogues with 20 companies in accordance with the AOA’s engagement strategy
Regarding the financing of the green transition, the Swedish pension provider focused on transparency regarding green investments and its participation in 4 round tables and initiate dialogue with 2 Development Finance Institutions.
Alecta’s Portfolio and Results
“Many of the companies we invest in have an ambitious approach to climate. For example, 77 percent of the companies we invest in report scope 1 and 2 emissions, and the share of companies that have approved Science-Based Targets is 17 percent. In addition, a further 11% of the companies has committed to setting a Science-Based Target. However, there is room for improvement. Our ambition is to support our holdings in their transition. Leading up to 2025, this involves having dialogues with those companies in our portfolio that have not yet set climate targets, to follow up with those who do have targets, and an overall focus on enhancing the quality of data and reporting from all companies,” Peter Lööw adds.
In 2020, Alecta engaged in 44 ESG dialogues, up from 18 in 2018. Climate has been the dominant topic. According to the pension provider, the carbon footprint intensity of the equity portfolio has decreased from 4,7 CO2e /million in revenue to 2,8 CO2e /million in revenue since 2016.
By end of 2020, Alecta’s portfolio holdings of green bonds had increased from SEK31 billion in 2018 to more than SEK50 billion in green bonds. Other sustainability related assets such as social or impact bonds represented another SEK14 billion. In the Swedish real estate portfolio, Alecta doubled the number of environmentally certified properties between 2018 and 2020, and cut the carbon footprint generated from energy procured for our properties with 50%.
Image courtesy of Alecta