As we consider climate change and its knock-on effects to be one of the biggest systematic risks to our assets in the long run, we have drawn up a special climate strategy as part of the overall sustainability strategy.
The Board of Directors of Första AP-fonden has adopted a climate strategy with the goal of reducing the portfolio’s carbon emissions so that it is climate neutral by 2050, mainly by ensuring the companies we own reduce their carbon footprints. This can be achieved without us compromising on our objective of attaining a high return in the long run.
Första AP-fonden’s climate work is based on understanding, identifying and analysing climate risks and how they may affect the value of the Fund’s investments, and on the Fund’s ability to promote sustainable development. The analysis forms the basis for:
- How we integrate and address climate risks in the Fund’s portfolio strategies in a relevant way
- How, through active ownership and dedicated investments, we contribute in a meaningful way to restricting global warming in accordance with the Paris Agreement
- How we measure and report our work
Climate risks are usually divided into transition risks – mainly driven by regulatory changes, technological development and new consumption patterns – and physical risks – as a result of gradually increasing temperatures and extreme weather events. Different companies and industries will be affected to different degrees depending on the scenario.
The goal is to reduce the portfolio’s carbon emissions so that it is climate neutral by 2050
Greater consideration is given to material climate risks when investing in different asset classes. The Fund has for example developed a tool for identifying the most material climate risks in the equities portfolio based on transition risks. The tool will be used to prioritise integration efforts and the Fund’s active ownership, and over time it will encompass more asset classes.
Divestment of fossil companies
Based on the Fund’s analysis of climate risks, we believe that the ongoing transition to a less fossil-dependent economy represents a great source of uncertainty for companies operating in the coal, oil and gas industry, and that investing in these companies therefore entails a higher financial risk for Första AP-fonden.
The Fund has therefore decided to divest companies with fossil-based operations. The decision is a move in reducing the Fund’s climate exposure.