The Second AP Fund (AP2) posted a total return of 7.0 percent, excluding costs, for the first half of 2014. Fund capital increased by SEK 15.6 billion to SEK 280.3 billion by June 30 2014. The net result for the first-half amounted to SEK 18.1 billion. Relative to benchmark index, return was 0.1 percent, excluding alternative investments and costs.

• The Second AP Fund’s assets under management totaled SEK 280.3 (248.3) billion on June 30 2014, against which net outflows to the national pension system were charged in an amount of SEK -2.5 (-3.1) billion.

• The Fund posted a first-half net result of SEK 18.1 (10.0) billion.

• The Fund’s return on the total portfolio was 7.0 (4.3) percent, excluding commission costs and operating expenses. Including these costs, the portfolio generated a return of 6.9 (4.2) percent.

• The relative return on the portfolio of quoted assets, excluding alternative investments and costs, amounted to 0.1 (0.2) percent, corresponding to a net contribution of SEK 0.3 billion.

• Operating expenses in terms of asset management costs continued to be low, remaining unchanged at 0.07 (0.07) percent for the period.

• Over the past ten years, the Fund has generated a return on invested assets of 102.2 percent, corresponding to an average annual return of 7.3 percent. Less inflation, this is equivalent to an annual real return of 6.0 percent.

“In the past ten years, the Fund has generated a total return of SEK 145.6 billion on investment. This is equivalent to an average real annual return of 5.8 percent after costs, which exceeds our targeted long-term return of five percent,” states Eva Halvarsson, CEO of the Second Swedish National Pension Fund/AP2.

“With a Fund capital in excess of SEK 280 billion, we have more than doubled the starting capital of SEK 134 billion which we received in conjunction with the launch of Sweden’s new national pension system in 2001. This increase in the value of the capital has been achieved during a period of considerable turbulence on global financial markets. Over the past thirteen years, we have experienced the impact of an ‘IT bubble’, a financial crisis and a debt crisis. In spite of these challenges, the Second AP Fund has attained its long-term goal, thereby fulfilling its role of buffer fund,” states Eva Halvarsson.

The complete half-year report (pdf) is published on the Fund’s website at www.ap2.se

A sustainability report will be published separately at the end of October.

For further details, please contact CEO Eva Halvarsson, Second Swedish National Pension Fund, or Ulrika Danielson, head of Corporate Communications, on +46 31 704 29 00.

The AP2’s Female Representation Index for 2014 reveals that the number of women on publicly quoted corporate boards has risen for the first time in three years, from 22.3 to 24.7 per cent. At the same time, the number of women in executive management positions continues to note a steady rise, amounting to 18.4 per cent for the same period – an increase of more than one percentage point.

“The trend is in the right direction. But there is still much to do in accelerating the rate of this increase and better utilizing all available competence. Stakeholders and nomination committees share a particular responsibility here. We are determined to shoulder ours and hope that many others will elect to follow the same path,” says Eva Halvarsson, CEO of the Second Swedish National Pension Fund/AP2.

If the pace of change noted over the past decade continues, it will be another 30 years before women fill 50 per cent of the seats on corporate boards. The corresponding forecast for achieving 50 per cent representation on executive managements is no less than 48 years.

AP2 is actively committed to increasing the diversity and quality of corporate boards. One aspect of this commitment is to conduct analyses of the work and results of nomination committees. For example, in instances where AP2 sees the potential for a broader and more fact-based recruitment process, it may well raise the issue at an Annual General Meeting.

“Recruiting from a fact-based and broadened pool of talent that embraces competent candidates found beyond the nomination committees’ normal networks of contacts offers companies the best hope of developing in an optimal way. This is why it is such an important question for us from an investment perspective,” states Eva Halvarsson.

Large-caps lead on corporate boards while small-caps feature greatest increase in executive management
The 2014 survey reveals that the large-cap companies have achieved the greatest increase in female representation at board level, rising by 3.9 per cent to 29.1 per cent. They also noted the highest percentage of women in executive management, at just over 19 per cent.

Even so, compared to last year’s figures, the largest increase in the percentage of women in executive positions, who accounted for 18.3 per cent of executive management, was noted by the small-cap companies, with a rise of 1.8 percentage points.

There is a marked difference between male and female-dominated industries. Companies in the Services and Consumer Staples sectors boast the highest proportion of women on their boards, while the Media & Entertainment and Healthcare sectors feature the highest percentage of female executives. The Commodities sector continues to note the lowest levels of women on company boards and in executive management positions, although levels in both cases have increased somewhat in the past year.

Background to the AP2 Women’s Index
Since 2003, AP2 has conducted an annual survey together with Nordic Investor Services to measure the number of women in middle management roles, in company management positions and on the boards of companies listed on the stock exchange. The 2014 survey comprised 252 premium and standard-listed companies on the Stockholm Stock Exchange. In addition, the number of women graduating from degree programmes that have traditionally served as a basis for recruitment to company management and boards has also been measured.

Read the report. (PDF document, 255 kB)

For further information, please contact:
Eva Halvarsson, CEO AP2, +46 (0)31 704 29 00 or Ulrika Danielson, Communications Manager, +46 (0)709 50 16 13.

The Swedish Government has appointed Johnny Capor as a new member of AP2’s board.

AP2 has today, after a comprehensive financial analysis, decided to accept the offer from Volkswagen of SEK 200 per share for Scania. AP2 owns 1,554,470 B-shares in Scania, which represents 0.2 percent of the capital and 0.04 percent of the votes.

For further details, contact CEO Eva Halvarsson, Second AP Fund, on 46 (0)31-704 29 00 or Ulrika Danielson, Head of Communication, on +46 (0)31-704 29 29.

The Ethical Council is developing its preventive dialogues in order to get companies to act more responsibly and thereby reduce the risk that they violate international conventions. The focus areas for the Ethical Council in 2013 included human rights, business ethics and environmental issues in the telecom, pharmaceutical, tobacco and cocoa industry. The Ethical Council has seen several examples of dialogues as an effective tool for influencing companies to improve their sustainability performance. 2013 brought the Ethical Council in dialogue with 133 companies around the world. Furthermore the Ethical Council held, with the assistance of external consultants’ dialogue with 101 companies.

“In 2013, the Ethical Council has developed its process in preventive work with companies,” says Arne Lööw, Chair of the Ethics Council 2014. “In dialogue with the company, we see that there often are changes in the business environment and the company during the course of dialogue. New problems may apply, while other problems are solved. Therefore, we see that it is important that there is an improvement in the company, but to seek a specific solution to a problem. Simply put a more flexible working model that takes height for changes over time. “

In 2013 eight reactive dialogues ended. With our new approach we were able to complete four dialogues where the objectives were met. In dialogues with AES, Toyota, Alstom and Veolia objectives where met in accordance with the Ethical Council’s intentions. AES now has policies in place for human rights tailored to each country’s legal structure. Toyota’s Philippine subsidiary now respect the right of employees to freedom of association and the right to organize. Alstom has sold their share of the tram project in the West Bank. Veolia has attempted to dispose their interest in a project on the West Bank, but sales have been delayed due to local authorities.

In four of the completed dialogues, assessed by the Ethical Council, continuing dialogues were not meaningful and therefore the Council recommended the AP funds to exclude the companies. Freeport McMoRan was excluded because of the serious negative environmental impacts at the Grasberg mine in Indonesia. Incitec Pivot and Potash intends to continue to buy and use phosphate from Western Sahara. Walmart shows no signs of improving their behavior regarding violations of workers’ rights. All funds followed the Ethical Council’s recommendations.

Link to report.

For more information please contact:
Arne Lööw, Chair of the Ethical Council 2014
Phone: +46 8 787 75 00
E-mail: info[at] ethicalcouncil.com

The Second Swedish National Pension Fund/AP2 posted a net result of SEK 30.1 billion for the year and, after payments to the national pension system, Fund capital totalled SEK 264.7 billion. The Fund’s return on the total portfolio for the year, excluding costs, was 12.8 percent. Return relative benchmark index, excluding alternative investments and costs, was 0.4 percent.

Consequent to the Second AP Fund’s strong performance over the year, return on investment exceeded the targeted average long-term annual real return of five percent. In the past five years, the Fund’s annual real return has totalled 9.8 percent and, over the past ten years, 5.8 percent. 2013 was a good year, especially with respect to the Fund’s investments in unquoted and market-listed equities. For the fifth year in succession, net flows to the pension system were negative and the Fund has now paid out a total of SEK 19.8 billion to cover the shortfall in the pension system.

• The Second AP Fund’s assets under management totalled SEK 264.7 (241.5) billion on December 31st 2013, against which net outflows to the national pension system were charged in an amount of SEK –6.9 (–3.8) billion.

• The Fund posted a net result for the year of SEK 30.1 (28.6) billion.

• The Fund’s return on the total portfolio was 12.8 (13.5) percent, excluding commission costs and operating expenses. Including these costs, the portfolio generated a return of 12.7 (13.3) percent. • Operating expenses in terms of asset management costs remained low, totalling 0.07 (0.07) percent for the period.

• The relative return on the portfolio of listed assets, excluding alternative investments and costs, amounted to 0.4 (1.1) percent. For the last five years the average relative return has been 0.54 percent.

• Return on alternative investments was 13.4 (13.9) percent.

“This year’s result is the second highest recorded since the Fund was established. But what you see on the bottom line in any given year is not the most important thing. What is important is that we achieve a stable long-term return over time, for all generations. The 2013 result means that we have exceeded our targeted return for the past five and ten years by a good margin,” says CEO Eva Halvarsson, Second AP Fund.

The English version of the AP2 Annual Report 2013 will be available at www.ap2.se from the beginning of March.

For further details, contact CEO Eva Halvarsson, Second AP Fund, on 46 (0)31-704 29 00 or Ulrika Danielson, Head of Communication, on +46 (0)31-704 29 29.

The Swedish Government has appointed Christer Käck as a new member of AP2’s board.

The First, Second, Third and Fourth AP Funds (AP1-AP4) are to divest their holdings in Walmart, Freeport McMoRan, Incitec Pivot and Potash after being advised by their Ethical Council that several years of engagement with the companies had failed to delivered the desired results.

The Ethical Council has in recent years engaged in dialogue with retail chain Walmart Stores, mining company Freeport McMoRan and chemicals producers Incitec Pivot and Potash. In spite of a strong commitment to this process, the Ethical Council has been unable to achieve its objectives. It has therefore chosen to terminate the dialogue and issued a recommendation to each fund to exclude the companies’ shares from their investment portfolios. All four funds have elected to follow the recommendation.

“The Ethical Council performed a detailed analysis of the four companies and concluded that AP1-AP4 should exclude them as investment vehicles from their portfolios,” said Christina Kusoffsky Hillesöy, Chairman of the Ethical Council.

“Engagement is the Ethical Council’s primary tool for encouraging companies to act responsibly. Exclusion from the investment portfolio is a last resort when other avenues have not worked. This is therefore a setback for us in so far as we have been unable to secure lasting improvements despite several years of active engagement. We do not believe further interaction with these companies will be fruitful and have therefore recommended that the AP funds exclude them from their investment universe.”

The Ethical Council engages with around 200 companies every year in a bid to make a difference. As long-term, responsible and active investors, the AP funds seek to drive positive change in environmental and social governance at companies worldwide. The Ethical Council engages with companies as long as it believes that dialogue could lead to positive change.

The Ethical Council bases its recommendation on exclusion of Walmart Stores Inc. (Walmart) on the fact that the company in its US business is linked to systematic abuses of workers’ rights, in contravention of the ILO core convention on working rights. The company also denies employees their right to form and join trade unions.

The Ethical Council has engaged with Walmart on this front ever since the council was formed in 2007. The aim has been to persuade Walmart to adopt group-wide policies and guidelines on workers’ rights that comply with international guidelines on the right to collective wage bargaining and the right to unionise. A further goal has been to prevail on Walmart to establish a credible monitoring system. Notwithstanding concerted efforts by the Ethical Council encompassing different approaches and collaboration with other investors, the council has been forced to conclude that Walmart continues to fall short of its dialogue objectives. The Ethical Council takes the view that continued dialogue with Walmart will be to no avail because the company has not changed its view on workers’ rights.

The Ethical Council’s recommendation on exclusion of Freeport McMoRan Copper & Gold Inc. (Freeport) reflects the fact that the company through its mining activities in Indonesia has been linked to serious adverse environmental impacts that contravene the UN Convention on Biological Diversity. Freeport’s Grasberg mine in Indonesia is located in an area of high biological diversity and is adjacent to Lorentz National Park, a UNESCO world heritage site. The Grasberg mine releases large quantities of mining waste into a nearby river.

Engagement with Freeport began in 2007 but has failed to deliver on the Ethical Council’s objective of persuading Freeport to take actions to prevent future treaty violations. Freeport’s chief executive officer and chairman have informed the Ethical Council that the company reserves the right to release waste into rivers. The Ethical Council’s has therefore concluded that further dialogue is likely to be ineffectual and that there remains a continued risk of further treaty violations due to the company’s reluctance to exclude the possibility of deploying its controversial waste processing practices in future projects.

The recommendations on exclusion of Incitec Pivot Ltd and Potash Corp. are based on both companies being purchasers of phosphate from a Moroccan supplier that mines its product in Western Sahara. Western Sahara has been under Moroccan occupation since 1975 and is on the United Nations’ list of non-self-governing territories that should be decolonised. The UN’s legal counsel stated in January 2002 that exploration of mineral resources in Western Sahara without local consent would be in breach of the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights.

The Ethical Council has engaged with both companies since 2010 with the aim of persuading them to cease procurement of phosphate from Western Sahara or to prove that the extractive process complies with the interests and wishes of the Western Saharan people, in accordance with the UN legal counsel’s statement of 2002. The Ethical Council has also urged both companies to adopt policies undertaking to refrain from actions that violate international humanitarian law. The Ethical Council concludes that further dialogue with Potash and Incitec Pivot would be to no avail as neither company has indicated an intention to cease procurement of phosphate from Western Sahara in the near future or been able to demonstrate that the extractive process accords with the interests and wishes of the Western Saharan people.

For further information, please contact:
Christina Kusoffsky Hillesöy, Ethical Council, Chairwoman 2013
Phone: +46 709 517 223
Email: info@ethicalcouncil.com

About the Ethical Council: AP1, AP2, AP3 and AP4 coordinate their work on environmental and social responsibility via the Ethical Council. The Ethical Council is the funds’ joint platform for driving positive change in foreign companies implicated in non-compliance with international environmental and human rights conventions. Combining a preventive and reactive approach, the Ethical Council works to make a difference in the field of environmental and socially responsible stewardship. Preventive initiatives include actions to ensure that companies in which the funds invest operate in accordance with relevant ethical, social and environmental standards and have policies and operating and monitoring systems in place to enable responsible stewardship. Reactive measures include engaging in dialogue with companies that violate international conventions to encourage them to comply with those conventions and to take action to avoid future violations.

The Second AP Fund (AP2) posted a total return of 4.3 percent, excluding costs, for the first half of 2013. The net result for the first-half amounted to SEK 10.0 billion and, after net outflows to the national pension system, Fund capital increased to SEK 248.3 billion. Relative to benchmark index, return was 0.2 percent, excluding alternative investments and costs, corresponding to a net contribution of SEK 0.4 billion.

• The Second AP Fund’s assets under management totalled SEK 248.3 (227.3) billion on June 30 2013, against which net outflows to the national pension system were charged in an amount of SEK -3.1 (-1.7) billion.
• The Fund posted a first-half net result of SEK 10.0 (12.3) billion.
• The Fund’s return on the total portfolio was 4.3 (5.8) percent, excluding commission costs and operating expenses. Including these costs, the portfolio generated a return of 4.2 (5.7) percent.
• The relative return on the portfolio of quoted assets, excluding alternative investments and costs, amounted to 0.2 (0.5) percent, corresponding to a net contribution of SEK 0.4 billion.
• Operating expenses in terms of asset management costs remained low, totalling 0.07 (0.08) percent for the period.
• Over the past ten years, the Fund has generated a return on invested assets of 102.7 percent, corresponding to an average annual return of 7.3 percent. Less inflation, this is equivalent to an annual real return of 6.0 percent.
• The Fund’s level of currency exposure was 20 (15) percent.

“The Fund’s long-term asset management strategy, which features increased portfolio diversification, continued to prove successful. Over the past ten years, the Fund has generated a real average annual return of six percent, which significantly exceeds our long-term target of an average annual real return of five percent,” states Eva Halvarsson, CEO of the Second Swedish National Pension Fund/AP2.

“Furthermore, it is pleasing that all asset classes once again outperformed against the benchmark index, thereby generating a net contribution of SEK 0.4 billion,” states Eva Halvarsson.

The complete half-year report (pdf) is published on the Fund’s website at www.ap2.se

A Corporate Governance Report will be published separately in October.

For further details, please contact CEO Eva Halvarsson, Second Swedish National Pension Fund, or Ulrika Danielson, head of Corporate Communications, on +46 31 704 29 00.

The 2013 edition of AP2’s Women’s Index reveals that the number of women on corporate boards has declined since 2011 and, according to this latest report, account for only 22.3 per cent. However, the number of women in executive management positions continues to note a steady rise, to the current level of 17.2 per cent.

Since 2011, the proportion of women employed by the 250-plus companies quoted on the Stockholm Stock Exchange has declined from 22.9 per cent to 22.3 per cent in 2013. This decline stems from the smaller companies, while the proportion of women employed by the ‘large cap’ companies has increased to slightly in excess of 25 per cent.

During the same period, there has been a rise in the level of female representation on corporate boards and, in the past year, this increase has totalled almost an entire percentage unit, rising from 16.3 per cent to 17.3 per cent in 2013. The corresponding level for the ‘large cap’ companies is close to 19 per cent.

“It is troubling that the proportion of women on corporate boards has declined again this year, and in principle has reverted to the same level as noted for 2010. As shareholders, we must seriously – and to a still greater extent – address the issue of what we can do to reverse this trend. What is pleasing is the increasing number of women in executive management positions, especially in light of the fact that this group constitutes the primary recruiting base for future board members,” states Eva Halvarsson, CEO of AP2.

If the pace of change noted over the past decade continues, it will be another 31 years before women fill 50 per cent of the seats on corporate boards. The corresponding forecast for achieving 50 per cent representation on executive managements is no less than 52 years: i.e. not until 2065.

There is a marked difference between male and female-dominated industries when it comes to the number of women in executive positions and, particularly, in the overall number of employees. Female representation is greatest in industries with the highest percentage of female employees. Companies in the Services and Consumer Staples sectors boast the highest proportion of women on their boards, while the Healthcare and Media & Entertainment sectors have the highest percentage of female executives. The Commodities sector is worst, with the lowest levels of women on company boards and in executive management positions. Even so, there has been an increase in the number of women in executive management. Consequently, men comprise less than 90 per cent of the executive managements of companies in this sector (women account for 11.7 per cent).

The number of women studying for degrees in fields that have historically been a source of recruitment for company management and board members has increased over the past 30 years; from just below 20 per cent to almost 50 per cent today. However, women tend to drop off in the transition from graduates to employees (almost a third), to managers (one fourth) and to Group management (one sixth).

Since 2003, AP2 has conducted an annual survey together with Nordic Investor Services to measure the number of women in middle management roles, in company management positions and on the boards of companies listed on the stock exchange. In addition, the number of women graduating from degree programmes that have traditionally served as a basis for recruitment to company management and boards has also been measured.

Read the report. (PDF document, 1,8 MB)

For further information, please contact:
Eva Halvarsson, CEO AP2, +46 (0)31 704 29 00
Ulrika Danielson, Communications Manager, +46 (0)709 50 16 13