Sweden’s AP2 has been using a tool it developed itself to find out why its carbon footprint is shrinking, and as a result now focusing efforts on ensuring more of that shrinkage comes from companies getting their own emissions down.

Having committed to net-zero emissions by 2045 in line with Sweden’s climate goal, the fund – which manages around a quarter of the buffer capital in the Swedish income pension system – has implemented a Paris-aligned benchmark for all listed equities and corporate bonds.

This has led to a 36% fall in portfolio emissions between 2019 and 2021, according to a case study included in the 2022 Paris-aligned Asset Owners 2022 progress report.

While the SEK440bn (€40.6bn) fund could achieve its reduction targets just by shifting the portfolio towards low-emitting assets, AP2’s underlying objective is to contribute to the reduction of global emissions, according to the case study.

To this end, AP2 has used an internally-developed emissions data tool to analyse changes in portfolio emissions, as well as to assess how these changes can be attributed either to changes in holdings or to changes in actual company emissions.

A graph in the PAAO report showing attribution analysis of the change in carbon footprint between 2020 and 2021 for AP2’s global equities and corporate bond portfolios shows that most of the decrease is in fact due to changes in the fund’s holdings, and that while company changes in emissions contribute as well, they do so to a lesser extent.

Ulrika Danielson, head of communications at the Gothenburg-based buffer fund, told IPE that AP3 was now in the process of analysing the data thoroughly.

“But more of the change needs to come from company emissions reductions and this is where we focus our climate efforts going forward,” she said.

Danielson said AP2 would use the findings of future work to contribute to the transition towards a society in line with the Paris Agreement and to reach the fund’s goal of net-zero emissions by 2045.

“We use the conclusions to actively engage with companies, both directly and in investor collaborations, to encourage companies with high emissions or insufficient mitigation plans to adopt and deliver on robust emissions reduction plans, and to report transparently,” she said.

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