AP2 Embeds Nature Within Sustainability

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    Stockholm (NordSIP) – The gradual convergence of the two interconnected crises of climate and nature is evident in the publication by Sweden’s Andra AP-fonden (AP2) of its 2023 Sustainability Report.  The €37 billion buffer fund announced on 8 April 2024 its decision to release a combined report that follows the recommendations of both the Task Force on Climate-related Financial Disclosures (TCFD) and the more recently completed Taskforce on Nature-related Financial Disclosures (TNFD) framework.

    The more well-established climate-related reporting is now supplemented by nature and biodiversity information drawing on the emerging range of available metrics.  Some aspects of the methodology are still under development, with AP2 taking part in the Biopath project overseen by the Mistra Foundation for strategic environmental research. The project aims to develop a methodology, metrics, and tools for the integration of biodiversity considerations into financial decision making.  AP2 also employs the Forest 500 tool from UK-based non-profit Global Canopy, which supports the deforestation risks in the portfolio.  The fund continues to work on developing its approach to deforestation in partnership with German sustainable finance think tank Climate and Company.

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    Priority focus on deforestation

    The latter collaboration stems from AP2’s signing of the Financial Sector Commitment on Eliminating Agricultural Commodity-Driven Deforestation and commitment to achieving a deforestation-free portfolio by 2025.  Together with Climate and Company, they aim to provide a practicable and freely accessible workflow to help all investors assess the deforestation exposure in their portfolios based on existing tools and metrics.  AP2 is also stepping up its deforestation-focused engagement activities in line with the Finance Sector Deforestation Action (FSDA), which was launched at COP26 and brings together 36 large financial institutions and asset owners to jointly tackle commodity-driven deforestation risks from livestock, soy, palm oil, pulp, and paper production in their investment and lending portfolios by 2025.  AP2’s efforts on deforestation extend to policymakers via its participation in the Investor Policy Dialogue on Deforestation (IPDD).

    AP2’s work on nature-related risks and exposure beyond deforestation continues, with the fund having conducted a detailed analysis of its portfolio exposure to sectors with a high impact and dependence on nature resources and ecosystems.  This was carried out using the ENCORE tool maintained by Global Canopy, the United Nations Environment Programme Finance Initiative (UNEP-FI) and UNEP World Conservation Monitoring Centre (WCMC).

    By fully integrating nature into its sustainability report, AP2 is reinforcing its commitment to be nature positive by 2030.  Although the precise goals for this overall aim have not yet been set, AP2 does have a firm target of having a deforestation-free investment portfolio by 2025.  While work continues on defining the full range of underlying targets, AP2 defines its direction of travel towards an overall objective whereby nature, with biodiversity, ecosystems and natural capital, develops in a positive direction, with the fund contributing to this development.

    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.
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