AP4 does not invest in tobacco companies

AP4 has made a business decision not to invest in tobacco companies given the risks involved are deemed to be significant and that over time these companies will underperform the index.¹ "Tobacco company" refers to companies that manufacture tobacco products for smoking (cigarettes, cigars, etc.) and snuff in various forms.

Tobacco use, both active and passive, is harmful to one's health and may eventually lead to increased risk of disease and premature death for affected individuals. Despite this information tobacco is legal in most countries. However, awareness is increasing regarding both health risks and the significant social costs attributable to tobacco consumption. This has led several countries to introduce more restrictive tobacco regulations regarding the marketing, sale and use of tobacco products. AP4 estimates that market regulations will continue to increase going forward. This, together with other business risks linked to the sector, may lead to significantly reduced profitability for tobacco companies over time.

AP4 supports the UN's long-term global sustainability goals. AP4's view is that the long-term risks associated with tobacco consumption counteracts the UN's long-term goal of ensuring health and well-being - a view AP4 expects more and more investors will share.

Overall AP4 believes that the risks associated with tobacco companies are incorrectly priced and will as such negatively affect the valuation of these companies over time. Historically, tobacco shares have generated relatively high returns, but AP4 believes the risks have increased and that tobacco companies over the long term risk becoming so-called "stranded assets". AP4 has therefore taken the business decision not to invest in tobacco companies.

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ยน AP4 took the strategic decision to exclude tobacco companies during 2016. The implementation work is largely completed and the divestment of these companies is completed where it has been practically possible, using reasonable efforts, without incurring additional administrative costs. Even after the completion of the implementation work, exposure to tobacco companies may occur from time indirectly through, for example, index derivatives and possibly via external mandates where AP4 does not have the authority to decide over exclusions