Stockholm (NordSIP) – Having weathered a storm of controversy over its holding of Saudi Aramco shares and the resulting negative press coverage, Sweden’s AP7 has now added the oil producer to its blacklist of companies excluded based on violations of international agreements and norms. The €109 billion pensions provider maintains a policy of universal ownership covering the whole listed equity index, while seeking to influence investee companies towards better practices through active engagement. When this does not achieve the desired outcomes within a reasonable timeframe AP7 will place the company on its blacklist and exclude it from the portfolio.
In the latest update to AP7’s blacklist, published on 3 June 2024, one Indian and five Chinese companies join Aramco in being excluded from the portfolio. All of them are blacklisted for acting against the targets of the Paris agreement by proceeding with large scale oil or coal operations while lacking any form of low-carbon transition plan. In discussing the Aramco controversy with AP7 in February this year it became clear that the pension fund has been taking a gradual, methodical approach towards the stewardship its fossil fuel holdings.
Coal and controversial oil initially prioritised
The first phase involved the blacklisting of all but a few coal extractors, based on a lack of transition plans and the fuel’s high climate impact. In 2022 AP7 turned its attention towards controversial fossil fuel extraction such as tar sands or Arctic region exploitation. It is now beginning to address the large conventional oil companies in its portfolio that continue to expand oil and gas production without implementing credible transition strategies. Oil majors such as Shell and ExxonMobil had already been blacklisted for violating human rights and environmental norms for the former and negative climate lobbying for the latter. The exclusion of Aramco roughly coincided with a new $13 billion share offering from the Saudi firm that could have led to an increase in AP7’s holding due tio index weightings.
AP7’s blacklist is publicly available and updated twice yearly. Previously excluded companies may be reinstated should certain sustainability or norms-based criteria be met, such as Brookfield Corporation and Rolls-Royce Holdings in this latest update. AP7 continues to hold shares in and engage with other fossil fuel companies such as TotalEnergies, the subject of a joint shareholder resolution in April this year that AP7 co-signed with the Ethos Foundation and 18 other investors demanding that the French firm separate the CEO and Chair of the Board functions in line with European governance practices.
