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AP3’s sustainability process

Offers support when making difficult decisions

As a major investor, AP3 has the opportunity to influence developments in a sustainable direction. To exert the greatest impact, sustainability work must be focused where AP3 can make the biggest difference and generate the most value for the state income pension system.

Sustainability process

To support the difficult decisions that sometimes need to be made, AP3 has a clear process that draws on the fund’s collective access to resources, including external partnerships. The work must be result-oriented, based on clear objectives and through effective advocacy. The sustainability process consists of clear steps that support each other and involve the entire management organisation.

  • The outcome of AP3’s advocacy must be clearly reported for evaluation purposes. Described below.
  • Corporate engagement is carried out directly by AP3, with other investors and through the AP funds’ Council on Ethics. Described below.
  • AP3 sets quantitative and qualitative goals in selected focus areas for governance, monitoring and reporting.
  • AP3 is developing focus areas on climate, environmental issues, social issues, corporate stewardship issues and other global sustainable development goals. Lean more here. 
  • AP3 identifies material sustainability risks and opportunities across the investment universe. Described below.
  • AP3’s investment universe must meet AP3’s minimum requirements, described below.
 the sustainability process

Sustainability framework with minimum requirements

AP3’s ambition is to fulfil its mission as a responsible owner through active corporate stewardship. This means that the fund also invests in companies and sectors with significant sustainability challenges. This does not mean that AP3 can or wants to invest in all companies, especially those with operations that are not sustainable or are not developing in a sustainable direction at all. The fund has several reasons for not  investing in companies. AP3 does not invest in companies:

  • which do not comply with international conventions and agreements ratified by the Swedish Parliament
  • of which the business model is judged to have too many transitional barriers
  • which do not meet minimum sustainability requirements. This is implemented by requiring holdings to pass a minimum level in AP3’s screening process to be an investable part of AP3’s investment universe
  • which, after a period of engagement, do not show that they are moving towards credible positive change.

As a result of the sustainability process, there are currently a number of companies that are not included in AP3’s investment universe. These include companies active in fossil fuels such as coal and oil sand. Twenty companies are currently excluded for failure to comply with conventions. These are related to labour law, inhumane weapons, cannabis for non-medical use and biodiversity.

Sustainability risks and opportunities

AP3 focuses its sustainability work where risks and opportunities are deemed material and where AP3 has opportunities to make a difference. The fund identifies which sustainability risks have the greatest impact on sustainable development and which are deemed to have the greatest impact on AP3’s investments.

Birch forest in sunlight
a meeting in progress

Proactive governance - locally and globally

AP3's exercised stewardship work varies depending on what the ownership looks like. The fund conducts corporate governance based on the conviction that well-managed companies create shareholder value and contribute to sustainable societal development. Being a committed and responsible owner means exercising our voice at general meetings, having dialogues with the companies and participating with other owners and other stakeholders in various national and international initiatives and contexts that promote good corporate governance and sustainable development.

Results

The outcome of AP3's sustainability process must be clearly reported with the aim of being result-oriented and being able to be evaluated. As part of the assignment to act as a role model in institutional asset management, AP3, together with other AP funds, draws up common guidelines for how results in the area of sustainability are to be reported.