AP4 is to tackle water scarcity in the latest push to expand its environmentally focused investment activities.
The SEK310bn (€33.1bn) Swedish buffer fund is seeking proposals for a global equity portfolio “with the specific focus on addressing the global water-scarcity challenge”, according to the tender.
Mats Andersson, the fund’s managing director, told IPE no decision had been reached on the portfolio’s size.
He said it would act as a natural extension of its activity in the area of corporate governance and its recent efforts to decarbonise its equity portfolio.
He added that the fund had “decided to put our toe into the water, so to speak” and investigate a standalone water mandate.
Investors including the Norwegian Government Pension Fund Global and the California Public Employees’ Retirement System have previously spoken of the advantages of greater transparency over water management, and asset owners have been urged to set a more proactive tone when engaging over water risk.
Although concerns about water usage have previously informed the activities of the Ethical Council, which coordinates the engagement efforts of the four main AP funds, with assets worth SEK1.2trn, AP4 has to date focused much of its environmental investment activity on decarbonising its equity portfolio, aided by the development of a low-carbon index with MSCI and French asset manager Amundi.
AP4 is also one of the founding members of the UN-backed Portfolio Decarbonization Coalition, which hopes to attract commitments to lower carbon output across $100bn (€92bnbn) worth of institutional assets.
The water mandate would be actively managed and benchmarked against the MSCI World index, pursuing a long-only and long-term investment strategy.
Separately, the buffer fund is also tendering for a global passive equity mandate, benchmarked against the MSCI World index.
AP4 said it would prefer the mandate’s developed market exposure to be held in a segregated account and structured as regionally focused sub-portfolios.
Emerging market (EM) exposure, meanwhile, could be achieved through pooled funds, it added.
The fund said it would welcome applications from managers where only the developed market aspect was passively managed, suggesting a more active approach would be possible for the EM segment.
Managers have until 5 August to submit their requests for proposals for either the water scarcity or passive global equity mandates.