Stockholm (NordSIP) – Sweden’s Seventh AP Fund (AP7), the state alternative to the private investment funds offered within the country’s premium pension system, is well known as a staunch proponent of the engagement approach, continuously striving to influence the companies in its impressive portfolio to be more sustainable. AP7’s stewardship efforts are not limited to company dialogues and voting at general meetings, however. Active ownership means also excluding some companies from the fund’s investment universe altogether. Used wisely, blacklisting can be an efficient engagement tool.
On 1, AP7 revealed that they are adding 14 new companies to their blacklist, which brings the total number of companies explicitly excluded from the investment universe to 102. It is obvious that climate change concerns are at the top of the fund’s priorities at this point, as the motivation behind all new exclusions is that they do not live up to the promise of the Paris Agreement. The blacklisted companies continue to conduct large-scale coal operations or oil sands extraction and do not have any credible transition plans.
“We engage with all companies before and after the blacklisting,” Charlotta Dawidowski Sydstrand, Head of ESG at AP7, explained to NordSIP previously. “We are clear in our dialogue with the company what actions it needs to take in order for us to revise our decision and for the company to avoid being blacklisted. The company then has a number of months to take action and report back. If the company has not fulfilled our revision criteria, it will be publicly blacklisted. After the blacklisting, we continue the dialogue, reminding them of our revision criteria, and if they take credible action, they will be removed from our blacklist, and we will invest in them again.”
Notable among the new exclusions are Adani Enterprise Ltd, as well as several Chinese and South-East Asian coal miners and power producers. “A large proportion of the new blacklisted companies are coal companies without credible transition plans,” comments Sydstrand. “We do not make sector-wide exclusions but blacklist companies with large scale operations in thermal coal and coal power that haven’t initiated their transition,” she adds.
On a more positive note, AP7 has decided to remove five companies from the blacklist. Cintas Corp, Entergy Corp, The Southern Company, TC Energy Corp (formerly TransCanada) and Toshiba Corp are no longer considered to violate any norms. “Our blacklisting is the result of engagement and analysis where we have found that many companies are moving in a positive direction,” says AP7’s Head of ESG. “In some cases, it is too early to determine the credibility in companies’ transition plans, but over time it will become increasingly clear,” concludes Sydstrand.
