As one of the first investors in the world, Andra AP-fonden (AP2) is publishing a Report on its work with human rights, based on the United Nations’ Reporting Framework. The Report describes how the Fund addresses its responsibility to respect human rights and the processes it employs to make these rights integral to its business activities. As well as describing areas where the Fund has made important strides in developing its human rights efforts, the Report also highlights some of the challenges identified.

Since 2016, AP2 has worked systematically to enhance the integration of human rights issues in its investment decisions. In publishing this Report, the Fund intends to increase transparency regarding its efforts to implement the UN Guiding Principles on Business and Human Rights, as well as its achievements and challenges during this process.

“As early as 2016, we had already decided to support the ‘UN Guiding Principles Reporting Framework’. It is therefore highly pleasing that we are now able to publish our first report. We hope it will not only explain how we are working with human rights, but also contribute to a broader dialogue on human rights issues in the finance industry,” says CEO Eva Halvarsson, AP2.

“We are actively engaged in integrating sustainability issues, including human rights issues, as part of our asset management activities. Among other topics, the Report describes how the indices we have developed in-house feature a method for identifying companies involved in human rights controversies, enabling their subsequent exclusion from the index in question. Furthermore, through a close and active dialogue with our external asset managers in China, we ensure that sustainability issues, including human rights, are integrated into investment decisions,” explains Eva Halvarsson.

Using the UN Guiding Principles Reporting Framework helps the Fund to focus on the key issues, while also functioning as an internal instrument for identifying deficiencies and developing the process. The first part of the Report addresses the Fund’s commitment, governance and policies concerning human rights issues. Part two addresses the Fund’s perceptions regarding the human rights issues it faces, and the challenge involved in identifying which are the most salient. The third part highlights the Fund’s reactive and proactive management of two of the Fund’s salient cases of human rights infringements: the accidents at mining-company Vale’s tailings dams and issues related to agricultural investments in Brazil.
Read the Report

More about the UN Guiding Principles on Business and Human Rights at www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf

For further details, please contact:
Ulrika Danielson, Head of Corporate Communications, on +46 709 50 16 13.

AP2 is one of five buffer funds within the Swedish pension system and one of northern Europe’s largest pension funds. The Fund’s assets under management total SEK 367.4 billion (30 June 2019), within essentially all asset classes and across the entire world. We are leading specialists in the Swedish pension system and are a world-class asset manager. We are a global leader in integrating sustainability in our investments, for the benefit of the pension system. The Fund is a long-term and responsible asset manager. www.ap2.se

Andra AP-fonden (AP2) reported a total return of 10.7 (2.9) per cent, after costs, for the first half of 2019. The net result was SEK 35.6 (9.8) billion, while the Fund’s assets totalled SEK 367.4 (352.4) billion at the end of the first half of 2019. Relative to the benchmark index, the return was -0.4 per cent, excluding alternative investments and costs.

– AP2’s return exceeds the Fund’s long-term return assumption of 4.5 per cent annually. In the past ten years the Fund’s average annual real return has amounted to 8.1 per cent, says Eva Halvarsson, CEO at AP2.

– The beginning of 2019 saw a strong recovery in the world markets after the major downturn at the end of 2018. However, this was followed by growing concern that global real economic growth may lose momentum. This concern was amplified by uncertainties regarding Brexit and, in May and June, the escalating trade conflict between USA and China. This political uncertainty ems to have played a part in a declining investment climate the world over, says Eva Halvarsson.

In the first half of the year the Fund adjusted its listed portfolio to the recent years’ favourable growth in holdings of real estate and private equity funds by reducing the allocation to Swedish and foreign equities and Swedish bonds. In addition, the share of capital allocated to emerging-market bonds issued in US dollars increased. The Board also decided that the Fund shall no longer be invested in tobacco companies or companies that are involved in the maintenance and modernisation of nuclear weapons systems, says Eva Halvarsson.

Key ratios

Read the Half-year report. (PDF document, 1,1 MB)

For further details, please contact:
Eva Halvarsson, CEO at AP2, on +46 31 704 29 00 or Ulrika Danielson, Head of Corporate Communications, on +46 709 50 16 13.

AP2’s Female Representation Index for 2019 shows that the proportion of women represented on the boards of companies listed on NASDAQ Stockholm continues to increase, albeit slowly, and is now at 34.0 (33.9) percent. The proportion of women in executive positions is also increasing and in this year’s survey it was 24.0 (23.2) percent. For the first time, more than 10 percent of listed companies have a female Chairman of the Board.

“This year’s Female Representation Index shows that the percentage of women on the boards of listed companies has increased by only 0.1 percentage point compared with last year. In the last five years the yearly increases have been greater. So, while this is the highest recorded level and the proportion continues to grow, I hope that this trend will not stagnate, as 34 percent is still too low,” says Eva Halvarsson, CEO of AP2.

“It is encouraging that the percentage of women board chairmen and CEOs is on the increase. For the first time, more than 10 percent of listed companies have a woman as board chairman (10.2%, increase from 8.8%). The proportion of female CEOs is 9.0% (increase from 8.4%),” she says.

“It is interesting to note that the nominating committees with women correlate favourably with boards with a higher proportion of women, while boards without nominating committees have a lower proportion of female board members than other companies,” she says.

On the board of primary-listed Large-cap companies, the proportion of women is 41.0 percent when the CEO is excluded from the board.

The percentage of companies with at least 25 percent women board members is increasing. Of the 332 companies in the survey, 254 have at least 25 percent women on the board.

Newly elected women on boards are younger than their male counterparts and female board members have on average a slightly higher number of board assignments than male members.

Background to AP2’s Female Representation Index
AP2 has since 2003 conducted an annual survey with Nordic Investor Services to determine the proportion of women at middle management level, in executive positions and on the boards of listed companies. The survey for 2019 covered 332 primary and secondary listed companies on NASDAQ Stockholm. In addition, the survey records the proportion of women who have graduated from study programmes that constitute the traditional recruitment base for management groups and boards.

For more information, please contact:
Eva Halvarsson, CEO, Andra AP-fonden (AP2), phone +46 (0)31 704 29 00
Ulrika Danielson, Head of Communications & HR, phone +46 (0)709 50 16 13

www.ap2.se

The figures refer to all companies listed on NASDAQ Stockholm, unless otherwise specified.

AP2 is one of the buffer funds within the Swedish pension system and one of northern Europe’s largest pension funds. AP2’s assets under management totalled SEK 334.8 billion (31 December 2018), in essentially all assets classes and across the whole world. AP2 is a long-term and responsible asset manager that has an important mission – to give Sweden’s current and future pensioners the best possible pensions by minimising the negative effect on pensions that would derive from applying the ‘brake’.

For more than 10 years, the AP Funds’ Council on Ethics has exercised influence on the AP Funds’ global portfolio of listed companies to improve their environmental, human rights and corporate governance work through engagement and dialogue. During 2018, the engagement and efforts of the Council on Ethics have been directed at problem areas such as Facebook and human rights; the use of pesticides threatening the survival of bees; and the legalisation of cannabis in Canada and the emergence of listed cannabis companies. Other focus areas have been oil companies’ long-term climate work, deforestation in South America, and tailings dams in Brazil.

With social media and fast-growing companies, the world is rapidly changing. Facebook, for example, is facing challenges pertaining to user integrity and human rights. The Council on Ethics has initiated a dialogue with the company on this specific issue. Oil companies such as Shell face the challenge of adapting their products to address climate change. The company has recently adopted a new, public long-term goal to reduce the carbon footprint of sold products. The goal is that net emissions over the entire life cycle from the energy products sold will halve by 2050 and decrease by 20 per cent by 2035.

During 2018, the Council on Ethics participated in the preparatory work related to the AP Funds’ new legislation, which includes revised investment guidelines as well as a new, ambitious sustainability goal. The legislation came into force in January 2019. It aims higher with regard to sustainability than the earlier regulations set in 2000. For the Council on Ethics, the working model will still be based on engagement and dialogue with a view to persuading companies to act in a more responsible way. This model is based on the conventions ratified by Sweden and has been applied by the AP Funds since 2007. The Council will continue to work to it when recommending the exclusion of a company.

John Howchin, Secretary General of the Council on Ethics of the Swedish National Pension Funds, says: “The wording in the old legislation – that the AP Funds ‘should take into account environmental and ethical considerations’ with regard to their investments – was indeed wise and ahead of its time. It offered the AP Funds guidance as well as the freedom to integrate and continuously develop their sustainability work, both in terms of their investment strategies and their ways of working. It also played its part in the establishment of the Council. This happened during a period of very rapid development and change in terms of the way society and the financial markets viewed sustainability. Today, 20 years later, almost all leading asset owners and managers are working with some form of sustainability strategy in place. With the revised legislation, the AP Funds and the Council on Ethics will have an even more powerful mandate regarding sustainability, and we will take that into account.”

Read more about the Council on Ethics’ company dialogues and other commitments in the Annual Report 2018.

For more information, please contact:
Ossian Ekdahl, Chairman of the Council on Ethics of the AP Funds, telephone: +46 8 566 20 200 ossian.ekdahl@ap1.se
John Howchin, Generalsekreterare AP-fondernas etikråd, +46 8 555 17 176, John.Howchin@ethicalcouncil.com

The Council on Ethics has been assigned by the AP Funds to create high long-term returns with low risk for current and future retirees, all based on one common core value: to take a proactive approach to sustainable development, and to demand and act in the name of transparency and positive change. The Council on Ethics works proactively as well as reactively, engaging with the AP Funds’ global portfolio of companies. The starting point is that well-managed and responsible companies create higher long-term returns with lower risk. The aim of the Council is to ensure that companies and industries conduct their sustainability work in a systematic, structured and transparent way.

Andra AP-fonden (AP2) has, since its inception, worked on integrating sustainability into its portfolio management. This enables the Fund to reduce risks and generate improved opportunities for higher returns. AP2 is now taking the next step in its sustainability programme. With the support of the changes to the AP Funds Act regarding exemplary fund management, the Fund has divested from a total of about 60 tobacco companies and companies involved in the maintenance and modernisation of nuclear weapons systems.

AP2’s sustainability work is based on the conviction that it leads to an improved management return, thereby making a positive contribution to the Swedish income pension system and for pensioners. This is why the fund integrates the sustainability work into its asset management.

On 1 January 2019, new investment rules regarding sustainable asset management for the AP Funds came into effect. According to the Act, the AP Funds must manage their assets in an exemplary way through responsible investments and responsible ownership. The new regulations entail a higher level of ambition for the AP Funds’ sustainability work.

In line with the requirements of the new legislation, AP2 has analysed the conventions that are aimed at restricting the use, scope or distribution of certain products or businesses over time. The Fund has evaluated the need for a changed approach based on the underlying purpose of the international conventions.

With the support of the new regulations regarding exemplary management, AP2 has divested from tobacco companies and companies involved in the maintenance and modernisation of nuclear weapons systems.

The divestment from tobacco companies is in line with the intention of the convention on tobacco control: a sharp reduction in tobacco consumption and the harmful effects of tobacco smoke.

Divestments from companies that are involved both in the maintenance and modernisation of nuclear weapons systems are aligned with the intention of long-term disarmament of nuclear weapons in all countries as expressed in the Non-Proliferation Treaty (NPT). AP2 has previously excluded nuclear weapons companies that operate in countries that are not allowed to have them according to NPT.

For more information, please contact Ulrika Danielson, Head of Communications, Tel. +46 (0)31 704 29 00.

AP2 is one of five buffer funds within the Swedish pension system and one of the largest pension funds in northern Europe. AP2 has assets under management of SEK 334.8 billion (31 Dec 2018) in virtually every asset class and all over the world. The Fund is a long-term and responsible fund manager that has an important mission – to give those who have worked in Sweden the best possible future pension by reducing the risk of the so called the brake being released. www.ap2.se

The Fund posted a negative return of SEK –4.3 billion in 2018, which corresponds to -1.3 per cent, reflecting above all negative stock market developments in the global equities markets, but also good results in non-listed assets. The Fund has nevertheless exceeded its long-term return assumption of 4.5 per cent. In the last five years, the Fund’s average annual real return has amounted to 5.8 per cent and, over the past ten years, 7.7 per cent.

“For AP2, 2018 was characterised by an underlying strong global economy, but also by some turbulence in the markets as a result of various geopolitical events, preparations for the changed investment regulations and continued sustainability integration. One important aspect of the latter has been the implementation of our internally-developed indices, which focus heavily on sustainability factors. We will continue to act in the best interest of Swedish pensioners by applying a strategy characterised by a long-term outlook and perseverance, whilst continuously seeking to make improvements,” says Eva Halvarsson, CEO of AP2.

“The downturn in the equity portfolio was counteracted by solid returns on, for example, private equity investments, real estate and Chinese government bonds,” explains Eva Halvarsson.

“We welcome the new investment regulations and the opportunity to invest more in various types of non-listed assets, which could compensate for a lower anticipated return on some listed assets, help diversify the portfolio further and set better conditions for creating continued solid, risk-adjusted returns,” says Eva Halvarsson.

• AP2’s assets under management totalled SEK 334.8 (345.9) billion as of 31 December 2018, against which net outflows to the national pension system were charged in an amount of SEK –6.8 (–7.4) billion.
• The Fund posted a net result of SEK –4.3 (28.8) billion.
• The Fund’s return on the total portfolio was -1.3 (9.0) per cent, after commission and operating expenses. Excluding these costs, the portfolio generated a return of –1.2 (9.1) per cent.
• The relative return on the portfolio of quoted assets, excluding alternative investments and costs, amounted to –0.2 (0.1) per cent.
• Operating expenses in terms of asset management costs continued to be low, amounting to 0.06 (0.06) per cent for the period.
• Over the past five years, the Fund has generated an average real return of 5.8 per cent per year and over the past ten years, an average of 7.7 per cent per year.

The Swedish version of the AP2 Annual and Sustainability Report 2018 is published today and the English version will be available at www.ap2.se from beginning of March.

For further details, please contact Eva Halvarsson, CEO at AP2, or Ulrika Danielson, Head of Corporate Communications, on +46 31 704 29 00.

Andra AP-fonden (AP2) today publish a report to provide an aggregated overview of the Fund’s green bond portfolio and the investments in environmental initiatives and projects. AP2 currently has a global portfolio of green bonds worth 5.7 billion SEK, comprising bonds issued by 52 different issuers and involving 1,300 different projects in 96 countries.

AP2 has now been active in the green bond market for a decade. In November 2008, AP2 participated in the World Bank’s first green bond issue, becoming one of the pioneers. Since then, the proportion of green bonds has gradually grown and since 2016 green bonds is a strategic asset class for the Fund.

“Climate change is one the greatest challenges of our time. Extensive investments are needed for a transition to a more sustainable global economy. When the opportunity to invest in green bonds was introduced in 2008, we saw a unique opportunity to combine global fixed income management and our commitment to climate change,” says Lars Lindblom, Fixed Income Portfolio Manager at AP2.

Green bonds are an efficient instrument for mobilising environmental related investments and increasing awareness of environmental issues. Today sustainability must be considered for all kind of organisations. Environmental issues involve risks as well as opportunities; everything from more frequent occurrences of extreme weather to new regulations and changing consumer preferences. Green bonds visualise and highlight sustainability efforts in organisations and investments undertaken to support the transition to a more sustainable development.

“Green bond reporting of proceeds gives us as investors more detailed information about the issuers and especially about their investments in environmental projects”, says Lars Lindblom.

The green bond market continues to grow. Interest in sustainability issues in general is increasing in the financial sector, especially in green bonds. AP2’s portfolio is expected to continue to grow on commercial terms as more and more investors choose to invest in green bonds.

Read the report on AP2´s external webpage.

For more information, please contact Lars Lindblom, Fixed Income Portfolio Manager at Andra AP-fonden, or Ulrika Danielson, Communications Manager, Tel. +46 (0)31 704 29 00.

Andra AP-fonden (AP2) reported a total return of 2.9 per cent, including costs, for the first half of 2018. Relative to the benchmark index, the return was -0.1 per cent, excluding alternative investments and costs. The net result was SEK 9.8 billion, while the Fund’s assets totalled SEK 352.4 billion by the end of the first half of 2018.

– AP2’s return exceeds the Fund’s long-term return assumption of 4.5 per cent annually. In the past ten years the Fund’s average annual real return has amounted to 6.4 per cent, says Eva Halvarsson, CEO at AP2.

– During the first quarter, the Fund implemented extensive changes to its management of foreign equities by introducing new benchmarks for both emerging markets and developed markets. Through the new indices the Fund also get exposures to a number of sustainability factors that, beyond improving the portfolio’s sustainability characteristics, also improve the expected return and risk. Among other things, the new indices entail a considerably lower carbon footprint, says Eva Halvarsson.

• AP2’s assets under management totalled SEK 352.4 (336.3) billion as of 30 June 2018, against which net outflows to the national pension system were charged in an amount of SEK -3.3 (-3.7) billion.
• The Fund posted a first‐half net result of SEK 9.8 (15.5) billion.
• The Fund’s return on the total portfolio was 2.9 (4.8) per cent, after commission and operating expenses. Excluding these costs, the portfolio generated a return of 2.9 (4.9) per cent.
• The relative return on the portfolio of quoted assets, excluding alternative investments and costs, amounted to -0.1 (0.1) per cent.
• Operating expenses in terms of asset management costs continued to be low, amounting to 0.06 (0.06) per cent for the period.
• Over the past ten years, the Fund has generated an average return of 7.3 per cent per year and, including costs, over the past five years, an average of 9.5 per cent per year.
• Since its inception in 2001, the Fund has generated an overall return of SEK 244.5 billion, corresponding to an average annual return of 5.9 per cent, including costs.

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

For further details, please contact Eva Halvarsson, CEO at AP2, or Ulrika Danielson, Head of Corporate Communications, on +46 31 704 29 00.

AP2’s Female Representation Index for 2018 shows that the proportion of women represented on the boards of companies listed on NASDAQ Stockholm continues to increase and is now at 33.9 (32.2) percent. The proportion of women in executive positions is also increasing and in this year’s survey it was 23.2 (21.7) percent. Large-cap companies account for the largest proportion of women on boards and in executive positions with 37.7 percent and 25.8 percent respectively.

“Large-cap companies are really leading the way and the proportion of women on boards and in executive positions are 37.7 percent and 25.8 percent respectively. Excluding CEOs, the proportion of women on the boards is 39.8 percent and 41.2 percent for primary listed,” says Eva Halvarsson, CEO of AP2.

“It is gratifying to note that 44.9 percent of newly elected board members today are women. At the same pace of change as the last five years, it will take 12 years for boards to comprise 50 percent women, and 24 years for 50 percent of executive positions to be filled by women. I think it shows that nominating committees and companies are well on the way to achieving gender equality on boards and management groups, irrespective of legislation,” says Eva Halvarsson.

The proportion of women on the boards of all listed companies on NASDAQ Stockholm, excluding CEOs, is 35.5 (33.8) percent while for primary listed companies it is 36.3 (35.2) percent.

The number of companies with a female Chairman of the Board increased during the year from 19 to 28. The proportion of companies with a woman as Chairman is 8.8 (6.2) percent. The proportion of female CEOs has increased significantly during the year, from 15 to 27, representing an increase of 80 percent. However, as a proportion of all CEOs, it is still a low level of 8.4 (4.9) percent.
Since 2002, the proportion of women in listed companies has increased from 6.1 percent to 33.9 percent (+ 27.8 percent) while the proportion of women in executive positions increased from 11.1 percent to 23.2 percent (+ 12.1 percent).

Of the 320 companies in the survey, 243 have at least 25 percent women on the board compared with 224 companies in 2017.

The sectors Financial Services and Consumer Goods have the highest proportion of women in their boards, 38.6 percent and 36 percent respectively. Financial Services and Healthcare have the highest proportion of women in management, 33.3 percent and 29.4 percent respectively. The sector Utilities have the lowest proportion of women in boards and boards, 11.1 percent and 0.0 percent, followed by Oil & Gas, where the proportion of women is 22.5 percent in boards and 10 percent in management. 

Background to AP2’s Female Representation Index
AP2 has since 2003 conducted an annual survey with Nordic Investor Services to determine the proportion of women at middle management level, in executive positions and on the boards of listed companies. The survey for 2018 covered 320 primary and secondary listed companies on NASDAQ Stockholm. In addition, the survey records the proportion of women who have graduated from study programmes that constitute the traditional recruitment base for management groups and boards.
AP2 Female Index 2018. (PDF document, 2,5 MB)

For more information, please contact:
Eva Halvarsson, CEO, Andra AP-fonden (AP2), phone +46 (0)31 704 29 00
Ulrika Danielson, Head of Communications & HR, phone +46 (0)709 50 16 13

The figures refer to all companies listed on NASDAQ Stockholm, unless otherwise specified.

The Council on Ethics of the Swedish National Pension Funds (the Council) celebrated ten years in 2017. During these ten years, the Council has influenced global portfolio companies to improve their work and information regarding environmental, social issues and corporate governance through corporate dialogues. During 2017 the dialogues have included discussions and meetings with companies relating to corruption, human rights and workplace issues in several industries, where the AP Funds as active owners have worked to bring about positive changes.

The Council is working based on the mission of the AP Funds, to create high long-term returns at low risk to current and future retirees, and based on the AP Funds’ core values – proactively promoting sustainable development, acting and demanding transparency and positive changes. The Council works both pro-actively and re-actively with global companies in the portfolios of the AP Funds. The starting point is that well-managed and responsible companies over time give higher returns to lower risk. The goal of the Council’s work is that companies and industries should work systematically, structured and transparently with sustainability.

In 2017, the Council conducted dialogues in various sustainability areas, with a total of 174 companies worldwide. Corruption has been a focus area, especially in Brazil where a major corruption scandal continues to roll up. Human rights violations continue to be another important focus area, and the Council has been working on issues relating to child labor in the tobacco industry.

“Long-term and sustainable value creation in companies means taking responsibility for their business. Transparency is important for owners and other stakeholders to assess how the company works, measures and manages sustainability. In the long run, transparency is fundamental to well-functioning financial markets, says Pia Axelsson, Chairwoman of the Council in 2018.

Read more about the Council’s corporate dialogues and other engagements in the 2017 annual report (PDF document, 4,6 MB) and www.etikradet.se

For more information contact:

Pia Axelsson, Chairwoman of the Council, telephone: +46 8 787 75 72

John Howchin, Secretary General of the Council, telephone: +46 8 555 171 76

e-mail: info@etikradetapfonderna.se

The Council on Ethics of the Swedish National Pension Funds (the Council)

The Council is a collaboration between First, Second, Third and Fourth AP Funds, which have the mission of the Riksdag to create high long-term returns at low risk to current and future retirees. The Council works to contribute to the AP Fund’s long-term returns by encouraging corporate social responsibility in business as regards to environment, social issues and corporate governance.

The Council aspire to make a difference. We seek to exert influence on companies all over the world in regard to sustainability issues, human rights, ethics, the environment, issues of great importance to people and society. Issues which can destroy or create value for companies. We use dialogue to get companies to adopt proactive measures and to deal with incidents. This is how we can mitigate and prevent problems and accidents in a range of companies and industries. And this is how we perceive we can contribute to sustainable development and importantly, sustainable pensions for current and future pensioners.