AP Funds Council of Ethics Powers on with New Head

    Stockholm (NordSIP) – 2022 has been a busy year for the joint corporate engagement arm of the Swedish National Pension Funds 1, 2, 3, and 4, the Council on Ethics (Etikrådet). An extensive strategic review of the organisation concluded last November that the collaboration between the funds is set to expand and that the Council will continue to be a key partner, integral to their coordinated sustainability efforts.

    Conducting this audit has not meant taking a break from the essential day-to-day work that the Council does. Given the extended scope of its efforts, however, strengthening the organisation has undoubtedly been a priority. The Council’s board, consisting of Magdalena Håkansson from AP1, Åsa Mossberg from AP2, Fredric Nyström from AP3, and Pia Axelsson from AP4, reinforced mid-2022 by Engagement Director Tytti Kaasinen, has been on the lookout for an executive director and two sustainability analysts.

    On 14 Mars, AP1, AP2, AP3 and AP4 issued a joint statement announcing that they have recruited Jenny Gustafsson as Head of the AP Funds’ Council on Ethics. Gustafsson, who is to join the Council in June, comes most recently from AMF and has previously worked at Handelsbanken, acquiring valuable skills and experience in leadership and sustainable investments. Her first task would be to build an organisation that can ensure the AP Funds continue to operate as exemplary managers and responsible owners in the field of sustainability, with a strong foundation of trust and a solid reputation.

    “I have long followed the work of the AP Funds and the Council on Ethics with great interest,” comments Gustafsson. “I can say that the Council has a good reputation, not least internationally, thanks to a solid, long-term approach.”

    Despite being well-versed in the work of the Council, there is certainly a huge legacy to delve into for the newly appointed executive director. A good start is, perhaps, the Council’s newly published 2022 report (in Swedish).

    Being proactive

    According to the report, the Council kept pressing on with proactive actions as well as reactive dialogues based on a thorough screening of the funds’ portfolio holdings. The pre-emptive work of the Council is organised in eight projects focusing on human rights, the climate, and corporate governance: Tech giants & human rights; Forced labour in the construction and textile industries; Child labour and the commodity cocoa; Transition in emission-intensive sectors; Increased climate transparency; Biodiversity and food production; Deforestation, biodiversity, and climate change; and Anti-corruption.

    To those following the work of the Council closely, most of the projects would be familiar from previous years. Even the newcomer on the list, signalling an increased focus on climate transparency, is an area the AP funds have closely monitored for years. According to the report, in its proactive work during 2022, the Council contacted and assessed around 100 companies regarding their climate-based reporting, intending to follow up advocacy work aimed at promoting greater transparency in line with the TCFD’s recommendations issued in 2019.

    “The Council found that companies have developed both focus on and transparency in climate-related issues. Most companies appreciated the feedback and the opportunity to discuss how they could further develop their reporting,” comments Pia Axelsson, Chair of the Council in 2022.

    She also sounds proud of the milestones achieved in projects initiated earlier, like that on child labour in the cocoa sector. “Significant progress has been made towards the goal of reducing child labour in cocoa farming, and eventually eliminating it altogether,” she says. “The focus of the project has been to ensure that children in cocoa-growing communities receive education, to ensure systems for identifying and remedying child labour and to enable cocoa farmers to earn an adequate living. Challenges remain, but in all these areas we can confirm that major improvements have been made.”

    Keeping track of holdings

    The objective of the Council’s reactive work is that companies adopt a more systematic approach to sustainability via policies, implementation, and transparent reporting. According to the report, 3.202 holdings in the portfolios of the AP Funds were screened during the year for incidents that could be considered to violate an international convention, a slightly higher number than last year (3.168). 3.091 of these passed the screening process without comment.

    “At year-end, advocacy dialogues were ongoing with 86 companies identified in the process. More than half are related to suspected human rights violations (60 per cent), just under a third to corporate governance (25 per cent) and the rest to the environment (15 per cent). Most of the company dialogues led to positive outcomes,” says Pia Axelsson.

    According to Axelsson, the Council’s reactive work will expand going forward. As of 2023, the screening will be extended to cover more asset classes. In addition to foreign-listed shareholdings, Swedish-listed shareholdings and credit investments will also be included. Both directly and indirectly owned holdings through fund investments will be screened to identify companies deemed to violate international conventions to which Sweden is a signatory.

    Image courtesy of Council on Ethics of the Swedish AP Funds
    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.

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