Sweden’s AP2 is working with German sustainable finance think tank Climate & Company to develop a tool for financial organisations to get a clear picture of the deforestation risk in their portfolios, the national pensions buffer fund announced this morning.

The SEK423.9bn (€36.5bn) Gothenburg-based fund said it had started a collaboration to “systematically identify deforestation exposure in global portfolios”, with the cooperation being funded by the charitable foundation of Californian philanthropists Gordon and Betty Moore.

AP2 said that through the partnership, Climate & Company would assess and combine existing resources to create a publicly-accessible workflow, which would be tested and applied to AP2’s holdings in listed equities – in a project aiming to highlight how far practitioners get with existing data resources and pinpoint any apparent gaps.

Åsa Mossberg, sustainability strategist at AP2, said: “We in the financial sector have a key role to play in accelerating the transition towards a deforestation-free economy through engagement with our portfolio companies and by reallocating capital.

“Through the collaboration with Climate & Company, AP2 is contributing to the development of practical guidance that becomes public and that the financial sector can use to map and quantify the deforestation risk in their portfolios,” she said.

AP2 said deforestation and land conversion was one of the main drivers of biodiversity loss and climate change.

Malte Hessenius, analyst at the German think tank, said Climate & Company’s publicly-accessible guideline aimed to provide the resources users needed, minimising the time and staff resources needed to fulfil deforestation-free commitments.

“By doing so, we aim to demonstrate to regulators that existing data and tools are sufficient to get started, while also highlighting crucial gaps that, when addressed, will simplify evaluations in future,” he noted.

All five buffer funds backing the main part of the Swedish state pension, the income pension, now have it written into their mandate that they must be managed in an “exemplary manner” with regard to responsible investment and responsible ownership, after the wording was also added to mandate of the smallest fund, AP6, in 2021.

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