Examples of investments

Sustainable on emerging markets

An innovative fund that invests sustainably on emerging markets is run by AP1 in association with asset management company BlackRock. The fund is data driven.

It was created in 2018 at the request of AP1 and is called the BlackRock Emerging Markets Equity Impact Fund.

In the fund, investments are made considering measurable environmental and social effects, without detracting from financial returns or the need to follow particular indices. Several different ESG (Environment, Social, Governance) aspects are factors.

Information is structured, filtered and validated using BlackRock’s own process for data-driven information processing. This means that investment decisions can be based on more relevant sustainability data than the companies’ own sustainability reports, which often do not reveal the whole picture.

Private equity boosts the companies’ development

AP1 invests some of its assets in unlisted companies.

“The portfolio has been built up by investing in private equity funds, which are administered by management teams in external companies. These teams make investment decisions and carry out the investments,” says Jan Rådberg, responsible for the private equity investments at AP1.

All in all there are 6,000 such managers in the world, but only a few of them live up to AP1’s requirements.

“Since we ourselves cannot invest in the companies directly, but only through private equity funds, it’s important that we choose the right asset manager. We have a global portfolio. The emphasis is on Europe and the US, but emerging markets also feature,” Rådberg explains.

One example of the Fund’s unlisted holdings is Norwegian ferry line Hurtigruten. The line is part of a British private equity fund which bought the company out of the Norwegian Stock Exchange a few years ago. Since then there have been some major changes. The ferries have been upgraded and renovated, the sales organisation has been restructured and the pricing structure has changed as well. The operation has also been extended with adventure and experience cruises to the Arctic and Antarctic, for example.

Photo: Karsten Bidstrup / Hurtigruten

Private equity holdings also include EG Group, one of Europe’s leading retail companies focusing on peripheral selling at service stations. The company’s strategy is to expand through acquisitions and now has more than 3,600 outlets in Europe. The first step was recently taken in the US with the acquisition of Kroger’s 760 stations and local stores. EG Group develops and renews the stations, partly by extending the product offering with well-known chains and concepts such as Starbucks, Subway and Carrefour.

Cows eat outdoors all year round

In New Zealand, AP1 owns dairy farms where cows can graze outside all year round, and therefore feed almost exclusively on grass. This is advantageous from a climate perspective, while at the same time the milk has a higher nutritional content and can be sold at a higher price.

The Fund’s investments in agriculture in New Zealand are managed in association with Southern Pastures, which views sustainability as essential to creating value in the long term. This is just one example of the Fund’s global ambition to integrate sustainability aspects in its investments.

Photo: Kat Jayne

Innovative properties in Paris and London

Real estate company CityHold is owned by AP1 along with AP2 and American pension fund TIAA.

The focus is on commercial properties in the most central hubs of Europe.

“It’s a stable strategy that lays the foundation for a constant influx of tenants and low risk, which suits long-term owners,” says Oskar Backman. He works with alternative investments at AP1, which include investments in real estate and infrastructure. The strategy for CityHold has now been expanded to create opportunities for higher returns by taking a limited development risk in some cases.

“We have ourselves invested in the development of a property in central London, founded on a strong faith in offices with a sustainability focus. And our expectations have come to fruition; more than half the building has now been rented, long before the moving-in date.”

Another innovative project can be found in Paris.

“It’s an exciting one from both a commercial and an urban planning perspective. When the city put out attractive land on the banks of the Seine to tender, bidders were asked to suggest how the site could be developed with regard to social and cultural aspects, for example.”

Emerige was the winning bidder, a development company that will work with David Chipperfield Architects to create offices, homes, a youth hostel, gardens, art studios and more, all based on the original building from the 1960s.

“CityHold was chosen in stiff competition with other investors for a proven track record of expertise and a fast investment process. This project will bring us a high rate of return,” Oskar Backman explains.