Sweden’s AP4 has moved to divest nuclear weapons and oil sand businesses after new investment guidelines came into force on 1 January.
The new rules formed a package of changes to the mandate of the four funds backing Sweden’s state pension – AP1, AP2, AP3 and AP4 – which also include freedoms to invest more in illiquid and alternative assets than is currently the case.
Around 45 companies related to nuclear weapons have been sold and five firms with oil sand activities were divested during 2018, according to Tobias Fransson, head of strategy and sustainability at AP4.
The sales resulted in proceeds of around SEK3bn, Fransson said, which was reinvested in AP4’s global equity portfolio.
Niklas Ekvall, chief executive of the SEK367bn (€35.9bn) fund, said: “We welcome the fact that sustainability is now implemented in the law with the clarification that asset management shall be conducted in an exemplary way for responsible investments and responsible ownership.
“We have now decided to increase our ambitions and divest from companies related to nuclear weapons and oil sands.”
The new guidelines implied a higher level of ambition on sustainability, AP4 said, adding that when managing funds, special weight had to be put on how sustainable development could be promoted without compromising the overall return objective.
Companies divested due to involvement in nuclear weapons included Airbus, Boeing, Lockheed Martin and Raytheon, while MEG Energy, Athabasca Oil and Canadian Natural Resources were among the stocks sold off as a result of the oil sands ban.
Explaining the decision to ban nuclear weapons firms from its portfolio, AP4 said it took the view that an exemplary interpretation of the Non-Proliferation Treaty supported the decision not to invest in nuclear weapons firms.
“AP4 assesses that the current upgrades and modernisations of nuclear weapon systems are not aligned with the intention of long-term disarmament as expressed in the Non-Proliferation Treaty,” the fund said in a statement.
As for oil sands activity, AP4 said it had decided not to invest where oil sand represented 20% or more of a company’s turnover.
Oil sand is a carbon-intense fossil fuel source, it said, meaning it should be phased out in a global transition to a low carbon economy in line with the UN Climate Convention and the Paris Agreement.
AP4 has already excluded companies involved in the production of tobacco, mines, cluster weapons, cannabis or those with 20% or more of turnover relating to thermal coal.
Meanwhile, a spokeswoman for AP2 told IPE it had already divested from many coal and oil sands companies in 2014.
“We have divested from approximately 80 companies as a result of financial climate risks,” she said, adding that AP2’s climate ambition was to develop the portfolio in line with the Paris Agreement.
She added that it was too early to say exactly what the Gothenburg-based fund would do with its portfolio following the introduction of the new investment guidelines.
The AP funds have a high-profile emphasis on environmental issues and sustainability in their investment activities, and take a leading role on ESG internationally.
However, they came under pressure last summer to divest from oil, gas and coal companies when Greenpeace ran a high-profile campaign in Sweden.