Sweden's AP Funds agree on joint reporting of carbon footprints

Sweden’s national AP Pension funds have all agreed to coordinate the way they report the carbon footprints of their investment portfolios, using a common system centred around three indicators.

The six funds – AP1, AP2, AP3, AP4, AP6 and AP7 – said the move was aimed at increasing transparency and improving assessment of their work on climate issues.

In a joint statement, they said: “As long-term owners and managers of Swedish pension assets, the AP Funds have a responsibility to generate maximum possible benefit for the Swedish pension system through responsible investment and management.”

The funds, currently awaiting a political decision on the reform of the entire buffer-fund system, said they had been given the job of investing and managing their investments in a sustainable manner.

From now on, the AP funds’ carbon footprints will be calculated as of 31 December each year, starting with the current year, based on the most recent carbon dioxide data available for direct emissions, as well as indirect emissions from purchased energy.

AP1, AP2, AP3, AP4 and AP7 will calculate the carbon footprints for their listed equities portfolios, based on the size of their equity interest, while AP6, whose brief is to invest in private equity, will report those indicators for its non-listed portfolio based on its equity interests.

The funds AP1 to AP4 and AP6 serve the function of buffer funds within the pension system, while AP7 provides the default choice within Sweden’s premium pension system.

The AP funds said the new reporting system would use the three most common indicators for carbon footprint reporting.

These include the absolute carbon footprint for equities portfolios, corresponding to the percentage of total emissions equivalent to the fund’s equity interest in a company; carbon intensity, where the absolute carbon footprint is related to the fund’s equity interest in the company’s market value; and carbon intensity, where the absolute carbon footprint compares with the fund’s equity interest in the company’s revenue.

In addition to these three indicators, the funds said they would also report on the proportion of capital assets assessed, as well as the amounts based on reported and estimated carbon dioxide emissions data.

The AP funds have already been active in analysing and reporting their carbon footprints, as well as promoting the practice within the industry generally.

AP3 said a recent analysis of the footprint of its listed shareholdings, properties and forestry showed these investments to be almost carbon-neutral, while AP4 said it was decarbonising its entire equity portfolio over the next 2-3 years.

A year ago, AP4’s chief executive Mats Andersson presented the Portfolio Decarbonisation Coalition project to the UN General Assembly.

AP2, meanwhile, was one of first institutional investors to measure the carbon emissions related to its portfolio, having scrutinised global equity holdings back in 2009.