To ensure that sustainability efforts are focused on the areas deemed to have the greatest impact on investments, AP3 works with focus areas. Based on the Board’s positions, AP3 is currently working with the following four focus areas: Environment and climate, Biodiversity, Social responsibility, and Corporate stewardship issues.
Targets and milestones
To drive change, AP3 sets targets and milestones in the focus areas.
- Environment and climate: AP3 will combat climate change and mitigate its effects in line with the Paris Agreement.
- Biodiversity: AP3 will consider the impact of its investments on material portfolio and societal risks related to biodiversity and ecosystems
- Social responsibility: AP3 will work to ensure that human rights, particularly as they relate to the companies’ activities, are respected, upheld and strengthened where necessary
- Corporate stewardship: AP3 will promote compliance with the seven principles of the fund’s Stewardship Policy. These principles cover shareholders’ rights and obligations, companies’
capital structure and boards of directors, audit and internal control, executive remuneration, the environment and ethics, and disclosure.
AP3’s governance of climate-related risks and opportunities
Since the AP funds’ operations are regulated by the National Pension Insurance Funds Act, which is adopted by the Swedish Parliament, the AP funds comply with the international conventions and agreements to which Sweden has acceded. The UNFCC, with the Paris Agreement, is one such convention.
AP3’s climate strategy
The sustainability policy has been developed to help clarify AP3’s sustainability work. In the area of climate change, the sustainability policy states that AP3 will contribute to climate change mitigation and adaptation in line with the Paris Agreement and that AP3’s portfolio will achieve net zero greenhouse gas emissions by 2050. Following the Board’s position, AP3’s organisation decided to join PAII, the Paris Aligned Investment Initiative.
Metrics and goals – AP3’s climate-related disclosures
As of 2014, AP3 applies specific climate goals. These have helped to spur internal sustainability engagement and to build stakeholder trust. In early 2019, AP3 adopted new sustainability goals that are
due to be reached by 2025.
- AP3’s asset portfolio will continue to contribute to reducing the risk of global warming.
- AP3 continues to measure and report the CO2 footprint.
- AP3 conducts scenario-based analysis of climate-related risks and opportunities in the portfolio.
- AP3 will further halve the fund’s CO2 footprint, mainly by influencing companies to reduce their own climate impact.
- AP3’s sustainability investments will double by 2025.
- Investments in green bonds will be doubled and increased to SEK 30 billion.
- Other sustainability investments will increase and double to SEK 25 billion.
- AP3’s directly owned unlisted companies shall be leaders in sustainability.
- AP3 continues to work to ensure that the fund’s directly owned unlisted real estate and infrastructure companies are leaders in sustainability. The goal means an increased focus on both sustainable production and construction.
Implementation and risk management
It is imperative for AP3 to understand where investment opportunities are located and how the Fund’s assets can guide progress in the right direction. Implementation takes place in different ways in
different parts of the portfolio:
- In the listed equities portfolio, AP3 engages with investee companies to encourage them to minimise their climate footprint and transition to sustainable practices. The Fund’s proactive governance work is carried out both to drive transition and to limit direct investment risks.
- Corporate stewardship is carried out by AP3 mainly in relation to Swedish companies, and with others at international level.
- The portfolio’s carbon footprint is also influenced by limiting or avoiding exposure to companies and sectors where the prospects for transitioning to a sustainable model are small.
- A key part of the climate strategy involves incorporating sustainability in the business strategies and operations of AP3’s real-estate investees. Buildings are high consumers of resources in terms of energy, materials and waste. It is of great importance to AP3 that the Fund’s directly owned property companies are sector leaders in sustainability.
- Investments that clearly help reduce climate risks and promote sustainable development. These asset classes include green bonds and other strategic sustainable investments, particularly those classed as alternative investments.
Development of tools and reporting according
to TCFD recommendations
Since 2017, AP3 has supported the global Task Force on Climate-related Financial Disclosure (TCFD) framework.The TCFD framework is a tool for describing and communicating AP3’s engagement with climaterelated risks. AP3 encourages the fund’s investees and external managers to report according to TCFD recommendations for different sectors. The main features are that the organisations should prepare and ensure:
- Governance of climate-related risks and opportunities
- Strategies for the current and potential impact of climate-related risks and opportunities on business operations, strategies and financial planning
- Implementation – processes for identifying, assessing and managing climate-related risks and opportunities
- Metrics and targets for assessing and managing relevant climate-related risks and opportunities.
AP3 will work to ensure that human rights, particularly as they relate to the companies’ activities, are respected, upheld and strengthened where necessary.
Social responsibility goal: Through the AP funds’ Council on Ethics, there are currently objectives for safer mining related to tailings dams and increased human rights accountability of large tech companies through the drafting of an expectations document.
AP3 will consider the impact of its investments on material portfolio and societal risks related to biodiversity and ecosystems.
Biodiversity goal: AP3’s ambition is for the portfolio to contribute to the conservation and positive development of biodiversity by 2030. The Fund also decided in 2021 to set specific biodiversity goals in line with what will be recommended by the TNFD.
AP3 will promote compliance with the seven principles of the fund’s Stewardship Policy. These principles cover shareholders’ rights and obligations, companies’ capital structure and boards of directors, audit and internal control, executive remuneration, the environment and ethics, and disclosure.
Corporate stewardship goal: Compliance with the seven principles of the fund’s Stewardship Policy. For example, AP3 works to ensure that companies have a well-balanced capital structure with appropriate share issue and buyback authorisation, that company boards have a balanced gender balance, that company auditors are independent and that management remuneration systems contribute to the creation of long-term shareholder value.
AP3’s sustainability reporting is integrated in our annual reports. Here you can find AP3s financial, sustainability and stewardship reports. […]
Third Swedish National Pension Fund (AP3) is an investor tasked with contributing to the stability of the Swedish income pension system on behalf of current and future pensioners. […]
Engagement generates added value. Well run companies deliver higher returns at a lower level of risk over time. AP3 sets out to make a difference through engagement, action and pressure for change. […]