Integration of sustainability
Two of the Fund’s investment beliefs concern sustainability, and more specifically that sustainability pays off and that climate change holds a special position within the sustainability framework, and constitutes a systemic risk. Since sustainability is important for the Fund’s return it plays a key role in the strategy and for investment decisions at all levels.
One principle is that sustainability must be integrated in all investment processes, from ALM analysis and selection of strategic portfolio, to active management decisions at securities level. Some of the overall asset classes included in the strategic portfolio are also directly linked to the ambition of contributing to sustainable development.
Sustainability is also integrated in the strategic portfolio via the indices representing respective asset classes. In recent years, AP2 has given great weight to developing and implementing multifactor indices for global equities and corporate bonds that are in accordance with the criteria for the EU Paris-Aligned Benchmark.
For alternative, non-listed, asset classes, indices are not the starting point for the portfolio composition. Instead, strategies are designed that are intended to achieve designated targets for the allocations, including the requirement of sustainable investments and the sustainability of the external asset managers that are engaged.
Within active management, sustainability is also an integrated element of the investment process. For example, sustainability factors have long been part of the model-based active management of global equities.