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Sweden's AP7 cuts six companies from investment universe

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AP7 has followed through on plans to blacklist several companies on climate change grounds.

Sweden’s SEK343bn (€35bn) national default fund announced yesterday it had dropped six companies from its investment universe, including oil giant Exxon and Russian gas company Gazprom.

It has also blacklisted North American companies Entergy, Southern Corp, Transcanada Corp, and Westar. AP7 said the companies were all in breach of the Paris Agreement on climate change.

In December, the pension fund said it was reviewing its stakes in the six companies, worth a collective €300m.

AP7 has now blacklisted a total of 14 companies in 2017, it said. These include a number of firms linked to the controversial Dakota Access Pipeline project in the US.

Two companies, alternative investments manager Brookfield Asset Management and Australian agriculture group Wesfarmers, have been reintroduced into AP7’s investment universe.

As of 15 June, AP7 excluded 67 companies.

The Ethical Council for Sweden’s AP funds system, which advises the six funds on ethical issues, said in its annual report for 2016 that engagement was a more sustainable and effective strategy than simply divesting from stocks.

Peter Lundkvist, senior strategist and head of corporate governance at AP3 as well chairman of the Ethical Council, said in an interview with IPE earlier this year: “The Ethical Council has during the past 10 years worked with engagement as a means to solve problems and incidents that occur in business operations of investee companies. It is a sustainable strategy instead of selling the companies.”

Norway’s Government Pension Fund Global, the world’s biggest sovereign wealth fund, reported in March that excluding companies by blacklisting them had cost it 1.1% of performance in 11 years.

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