Stockholm (NordSIP) – At the end of August, the Swedish National buffer funds AP1, AP2, AP3 and AP4 all published their half-year interim reports. AP1, AP2, AP3 and AP4 generated 5%, 4.9%, 7.1% and 6.9% returns for the first half of 2024, respectively. The reports also discussed the work of the AP funds during the first half of the year, focusing on
Considering the reports in detail shows the diversity of approaches by the AP funds, which considered sustainability in varying degrees while also focusing on different sustainability issues. While AP2 and AP3 discussed their sustainability in some length, looking at deforestation, human rights, stewardship and using case studies, AP1 and AP4 were less detailed in their discussions.
AP2 Focuses on Deforestation and Human Rights
AP2 was able to elaborate more on its sustainability efforts. From a top-down perspective, the first half of 2024 saw AP2 conduct a comprehensive review of its management strategy. “We are convinced that these changes will strengthen our ability to deliver long-term sustainable returns that contribute to a good pension for today’s and tomorrow’s pensioners,” says Eva Halvarsson. “By being more dynamic and proactive in our fund management, we can better adapt to a changing environment and create greater value,” says Eva Halvarsson, CEO of AP2.
On a more detailed level, AP2 discussed the implementation of its climate plan and the progress in diversity, as well as its work on deforestation prevention and human rights stance in China.
“Together with the think tank Climate & Company, AP2 has developed a model for identifying deforestation risk in listed portfolios, which is open for other investors to use. The Fund is working towards a target of engaging with 100 per cent of the companies, identified by the model as having very high deforestation risk and insufficient management of the risk, before the end of 2025. During the annual general meeting season, AP2 has marked its dissatisfaction by voting against general meeting proposals in companies with high risk and inadequate handling of the deforestation issue.
On the human rights front, AP2 was decided to leave China. “AP2 has a framework that identifies countries where there are financial, operational or sustainability reasons not to invest. The framework is based, among other things, on the UN Guiding Principles for Business and Human Rights. In accordance with the Fund’s framework, AP2 has decided not to include listed assets in China in its portfolios, primarily due to the high human rights risk.”
AP3 Focuses on Stewardship
Of the four AP funds, only AP3 published a dedicated stewardship report, dedicated to its engagement efforts with investee companies. According to the report, AP3 conducts engagement activities with all of the stocks it owns. The company’s work is developed around policies and action plans focusing on the four focus areas of biodiversity, climate change, human rights and governance. During the spring of this year, the company published the last of these action plans, focusing on biodiversity.
AP3’s strategy is not to focus exclusively on sustainable champions but rather to help steer companies towards more sustainable practices. “AP3 invests in companies with sustainability challenges. AP3’s main tool for influencing societal development in a sustainable direction is to steer companies towards sustainable value creation via active stewardship,” the stewardship report argues.
The report includes case studies for three of its focus areas, including trade union rights in the Amazon (human rights), AP3’s role in pressuring Shell to improve its energy transition strategy (climate change), using Science Based Targets Initiative (SBTi) to verify emissions targets (climate change) and its dialogue with real estate companies on health and safety concerns in construction sites (governance).
Germs, Cooperations and Awards
AP4 focused on the example the AP funds set as “international role models in sustainability”. “In recent years, AP4 has received a number of awards that we are proud and honored to have received. One of the 2024 awards is Environmental Finance’s Sustainable Investment Awards 2024, in the Sovereign Wealth Fund of the Year category, which we received for our work on thematic sustainability investments. The awards over the years are proof that our work is successful, which at the same time motivates us to continue to develop our operations,” says Niklas Ekvall, CEO of AP4.
Of all the four funds, AP1 was perhaps the most muted about its sustainability work. “Systemic issues related to climate change mitigation and sustainable development are becoming more important both in our mandate, and for society generally. These issues require us to constantly keep our knowledge up to date, and participate in early dialogues in diverse contexts with different stakeholders,” the report said before highlighting the work of the Council on Ethics of the AP funds work on antimicrobial resistance and its own cooperative efforts via Climate Action 100+.
