AP Funds’ Council on Ethics playing a key role in enabling good outcomes when the focus is on sustainability
– Through a proactive project on child labour in the cocoa sector, the Council has for several years been engaged in successful dialogue with seven of the world’s largest cocoa and chocolate suppliers. Significant progress has been made towards the goal of reducing child labour in cocoa farming, and eventually eliminating it altogether. 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 still remain, but in all these areas we can confirm that major improvements have been made, says Pia Axelsson, Chair of the Council in 2022.
One important proactive project that the Council has reported on in the past is the one concerning the big tech companies and privacy-related issues.
– “Several milestones have been achieved and in 2022 preparations started on an international collaborative project with the tech companies. This will be led by the Council and operated in conjunction with other international institutional investors. The aim is via dialogue to exert influence aimed at improving the management of sustainability challenges such as disinformation, extremism and election manipulation, says Pia Axelsson.
In its proactive work during the year, the Council contacted and assessed around 100 companies regarding their climate-based reporting, with the aim of following 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”, says Pia Axelsson.
The Council also collaborates with other investors through sector-wide dialogues, within the Climate Action 100+ project, in order to help companies in emission-intensive industries to develop roadmaps for transitioning to a low-fossil fuel society.
Through its reactive work, the Council exerts an influence on companies to address and prevent serious incidents. The objective is that companies should adopt a more systematic approach to sustainability via policies, implementation and transparent reporting, which may prevent incidents. More than 3,200 holdings in the portfolios of the AP Funds were screened during the year for incidents that could be considered to violate an international convention. 3,091 companies passed the screening process without comment.
– At year-end, advocacy dialogues were ongoing with 86 companies identified in the process. More than half related to suspected human rights violations (60 percent), just under a third to corporate governance (25 percent) and the rest to the environment (15 percent). Most of the company dialogues led to positive outcomes, says Pia Axelsson.
During 2022, the Council focused its attention intensively and in parallel on day-to-day and strategic activities, with the objective of assessing and refining the Council's mission, goals, working processes and organisation. The Council’s work is still regarded as highly important to the administrations of all four AP Funds and the Funds agreed to increase the Council’s resources and establish a three-person office.
– Through its strategic development activities, the Council's reactive work will also, as of 2023, be extended to cover more asset classes. The Council will continue to screen foreign-listed shareholdings and, in addition, Swedish listed shareholdings and credit investments as well. Both directly owned and indirectly owned holdings through fund investments will be screened, with the objective of identifying companies deemed to violate international conventions to which Sweden is a signatory”, says Pia Axelsson.
The full Annual Report 2022, english version, will be available in late March.