Climate and environment
In concrete terms we base our work on the Paris Agreement and the more ambitious Swedish environmental objective to achieve net-zero greenhouse gas emissions by 2045. Through this we are contributing to the climate transition, which we believe is a prerequisite for sustainable societal development.
Sustainability target for Climate & Environment
Paris Agreement: AP4 supports the Paris Agreement and the more ambitious Swedish environmental objective to achieve net-zero greenhouse gas emissions by 2045. We have cut carbon emissions by more than half for the listed equity portfolio since 2010, entailing a decrease of 63%. For 2030 our target is to further cut emissions in half from the 2020 level with the goal of net-zero emissions in the portfolio by 2040 at the latest.
Climate risks in the portfolio: We apply low-carbon strategies in the global equity portfolio. These are optimisation strategies that reduce exposure in each sector to companies with high carbon emissions or fossil fuel reserves. The strategies are based on historical emissions data as well as on forward-looking data to verify that the companies’ operations are aligned with the Paris Agreement and how various levels of carbon pricing may impact companies’ margins. The result of this affects divestments in our entire internally managed global equity portfolio.
Thematic sustainability investments: We continuously analyse sustainability trends and developments in various sectors. The various asset management units actively search for investments that contribute to and benefit from the transition to a sustainable society. The ambition is to make good investments from both financial and sustainability perspectives.
We continuously analyse sustainability trends and seek investment opportunities that we believe will incorporate both sustainability aspects and a high financial return over the long term.
Investments with a specific focus on climate change are based on AP4's thematic analysis for the first time in 2018. The development of investment opportunities in the field of sustainability is progressing rapidly and a comprehensive update of the thematic analysis was completed in early 2023.
The update has resulted in both knowledge development and refined tools for our asset management organisation. Both of these aspects are important for our continued work with thematic sustainability investments. The analysis was based on a broad external analysis to identify megatrends and a number of investment themes that cover about 90 percent of global greenhouse gas emissions.
The analysis identified five main investment themes:
• Fossil phase-out in energy systems
• A cleaner industry
• Fossil-free transport
• Living biosphere
• Green buildings and infrastructure
Within each investment theme, a number of investment opportunities were identified that AP4 monitors on an ongoing basis and actively seeks investment opportunities in.
These investments are made within the framework of the unlisted portfolio, such as in sustainable infrastructure including renewable energy.
Our global equity management manages a thematic portfolio of niche companies in environment-related themes such as energy transition with focus on fossil-free mobility, hydrogen gas, carbon capture and recycling. We also make substantial new investments in smaller companies in the health sector, and have invested in green bonds issued by governments and in social bonds.
Influence as owner: We have reduced the carbon footprint of our portfolio through portfolio changes. To achieve the climate goals, the companies that we invest in must also reduce carbon emissions in their own respective operations. In our ownership role we influence companies and cooperate with other investors to broaden knowledge about how the climate issue can be addressed in the asset management operations. We also engage in dialogues with political decision-makers to create conditions for a climate transition.
In 2022 AP4 further reduced the listed equity portfolio’s greenhouse gas (GHG) emissions by 3%. Since 2010 these emissions have decreased by a total of 63%, which is helping to reduce climate risk in the portfolio. AP4 measures and reports GHG emissions in accordance with uniform guidelines established for the AP Funds and we work continually to evaluate access to qualitative data to be able to broaden its measurement to an even larger share of the portfolio.