The Second Swedish National Pension Fund (AP2) is one of the first investors to have published a report in accordance with the Task force on Climate-related Financial Disclosures (TCFD) recommendations.

”We wanted to start reporting as soon as possible, both for the sake of our own learning but also because we want to know what we are talking about when we engage in dialogues with companies. We also hope our report can inspire others. It remains to be seen how widely the framework will spread among other asset owner and asset managers but generally speaking, there is very strong support for the TCFD recommendations,” says Christina Olivecrona, senior sustainability analyst at AP2.

At the end of 2015, the Financial Stability Board established a task force, TCFD, to draw up a set of disclosure recommendations which would help actors in the financial markets to understand their climate-related risks and opportunities. The TCFD framework is voluntary and applicable to all types of organisations. The TCFD recommends that disclosure reports should describe: 1) how climate-related issues are handled by the organisation’s governing organs (board and executive management team), 2) what strategy the organisation has regarding climate change and the transition to a low-carbon economy, 3) the organisation’s climate risks and opportunities, and 4) the metrics and targets used by the organisation.

”We are positive to the TCFD framework since it will increase the transparency of companies and hopefully provide investors with the information they need to assess a company’s climate risks and opportunities. The framework is also an important tool for our own activities since it provides a structured way of describing and communicating the Fund’s climate work,” says Christina Olivecrona.

In the autumn of 2017, AP2 started implementing the TCFD recommendations. AP2 has used the suggestions given in the TCFD recommendations to analyse its climate work, both with regard to industries generally and the specific guidance given to asset owners.

”The purpose of our efforts in 2017 was to improve information acquisition and describe our current climate management in the way prescribed by the framework. Our TCFD report describes the Fund’s climate management in the way set out in the framework and it gives examples of potential ways for us to develop our work regarding climate-related risks and opportunities,” says Christina Olivecrona.

Read the report here.

For further details, please contact Christina Olivecrona, Senior Sustainability Analyst at AP2, +46 31 704 29 00, or Ulrika Danielson, Head of Corporate Communications, on +46 31 704 29 29.

The Second Swedish National Pension Fund (AP2) reported a total return on investment of 9.1 percent for the full twelve months, excluding expenses. Assets under management rose to SEK 345.9 billion. The net result was SEK 28.8 billion. The Fund’s performance in 2017 means that it once again has exceeded the long term targeted return in both the long and short term.

CEO, Eva Halvarsson, comments on the result:

“Our return has continued to develop positively after yet another year with good results at a low cost. We are following our long-term strategy and have worked intensively in the area of sustainability.”

“The average annual real return for the last five and ten years amounts to 9.0 and 5.0 per cent respectively. This exceeds our long-term goal and shows that over time we have the ability to create value for Sweden’s pensioners, even in periods characterised by a turbulent world around us with financial crises.”

“Our costs remain low even though in 2017 we experienced an increased cost in the supply chain. The way we deal with this is to manage more and more internally and continue to develop our activities in a cost-effective way. This means that in the cost evaluations, we continue to be highly competitive and keep our distance to most other actors in the industry.”

“We aim to develop our portfolio in line with the two-degree target and our vision has long been to integrate sustainability in all our management.”

“An important step in integrating sustainability as part of the investment decisions is that we have continued to implement ESG (Environmental, Social and Governance) in the global equities asset class in our internal quantitative management. It is approximately 29 per cent of the total portfolio and amounted to SEK 99 billion at year-end. During 2017, we designed two new so-called multi-factor indices where, ESG is the most important factor for the weighting in the indices.

• AP2’s assets under management totalled SEK 345.9 (324.5) billion on December 31, 2017, against which net outflows to the national pension system were charged in an amount of SEK –7.4 (–6.6) billion.
• The Fund posted a net result for the year of SEK 28.8 (30.5) billion.
• The Fund’s return on the total portfolio was 9.1 (10.5) per cent, excluding commission fees and operating expenses. Including these costs, the portfolio generated a return of 9.0 (10.3) per cent.
• The relative return on the total portfolio, excluding alternative investments and costs, amounted to 0.1 (–0.4) per cent.
• Operating expenses, expressed as a percentage of asset management costs, remained low and amounted to 0.06 (0.07) per cent.

The English version of the AP2 Annual and Sustainability Report 2017 will be available at www.ap2.se from beginning of March.

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

The Second AP Fund (AP2) posted a net result of SEK 15.5 billion for the first half of 2017 and the Fund’s assets under management totalled SEK 336.3 billion. The Fund posted a total return of 4.8 percent, including costs. Relative to benchmark index, return was 0.1 percent, excluding alternative investments and costs.

“Despite a turbulent market, the Second AP Fund posted a total return of 4.8 percent for the first half of 2017. Our long-term strategy of greater exposure to emerging markets and other sectors – combined with a determination to manage as much of the Fund’s capital in-house as possible – have both contributed to a solid net result and to continuing low costs in relation to the volume of assets under management,” says Eva Halvarsson CEO of the Second Swedish National Pension Fund.

• The Second AP Fund’s assets under management totalled SEK 336.3 (308.0) billion on June 30 2017, against which net outflows to the national pension system were charged in an amount of SEK -3.7 (-3.2) billion.
• The Fund posted a first-half net result of SEK 15.5 (10.6) billion.
• The Fund’s return on the total portfolio was 4.9 (3.7) percent, excluding commission and operating expenses. Including these costs, the portfolio generated a return of 4.8 (3.6) percent.
• The relative return on the portfolio of quoted assets, excluding alternative investments and costs, amounted to 0.1 (-0.7) percent.
• Operating expenses in terms of asset management costs continued to be low, amounting to 0.06 (0.07) percent for the period.
• Over the past ten years, the Fund has generated a return on invested assets of 70.4 percent, excluding costs, corresponding to an average annual return of 5.5 percent. Less inflation, this is equivalent to an annual real return of 4.4 percent.
• Since its inception in 2001, the Fund has generated an overall return of SEK 221.3 billion, corresponding to an average annual return of 5.9 percent, including costs.

The complete half-year report (pdf).

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 proportion of women on the boards and in executive positions at listed companies continues to increase and Large Caps are leading the way.

In the 15 years that the Second AP Fund has published a Female Representation Index, the proportion of women on boards has increased by 26.1 percentage points. The Female Representation Index for 2017 shows that the proportion of women represented on the boards of companies listed on NASDAQ Stockholm continues to increase and is now at 32.2 percent compared with 30.7 percent the previous year. The proportion of women in executive positions is also increasing and in this year’s survey it was 21.7 (20.9) percent. Large-cap companies account for the largest proportion of women on boards and in executive positions with 37.1 percent and 24.9 percent respectively.

“We can see how the pace of change is accelerating and 41.9 percent of newly elected board members today are women. At the same pace of change as the last four years, it will take 11 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, CEO of Second AP Fund.

“However, the percentage difference between the proportion of women in executive positions and as board members has increased for the fourth consecutive year from 9.8 percent in 2016 to 10.5 percent in 2017 and is the largest since the surveys began. Our task now is to continue the work and not to lose momentum,” says Halvarsson.

The proportion of women on the boards of all listed companies on NASDAQ Stockholm, excluding CEOs, is 33.8 (32.4) percent while for primary listed companies it is 35.2 (33.6) percent.

Large-cap companies account for the largest proportion of women on boards and in executive positions with 37.1 percent and 24.9 percent respectively. Excluding CEOs, the proportion of women on the boards of Large-cap companies is 39.5 percent and 42.0 percent for primary listed Large-cap companies.

Of the 305 companies in the survey, 224 have at least 25 percent women on the board compared with 202 companies in 2016. At 22 companies there are no women board members and 82 companies have no women in executive positions. The proportion of women who are chairs and CEOs also remains low at 6.2 (6.3) percent and 4.9 (5.2) percent.

The Financial Services sector has the highest proportion of women on its boards, 38.5 percent and 34.3 percent respectively. The Financial Services sector also has highest proportion of women in executive positions, 30.6 percent and 29.0 percent respectively. Lowest proportion of women are in the Public Utility sector followed by Oil & Gas.

Background to the Second AP Fund’s Female Representation Index
The Second AP‐fund 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 2017 covered 305 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, Second AP Fund, 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.

Second AP Fund’s Female Representation Index (PDF document, 993 kB)

The Second AP Fund (AP2) has invested in the private equity fund, The Rise Fund, which is managed by TPG Growth, the global growth equity and middle market buyout platform of alternative asset firm, TPG. The Rise Fund is committed to achieving measurable, positive social and environmental outcomes alongside competitive financial returns. The Rise Fund’s objectives align with various of the UN Sustainable Development Goals.

AP2 has invested USD 50 million in the private equity fund, The Rise Fund. The Rise Fund’s strategy is rooted in the idea that private firms have an important role to play in making a positive contribution to global social challenges, and that they should be able do this without having to compromise on financial returns. Every challenge presented by the UN Sustainable Development Goals also presents an opportunity to have an impact, and investors can therefore contribute to the attainment of these global goals.

“The idea of impact investing is not new, but what is new and unique about this strategy is that The Rise Fund is relying on independent research to measure the positive outcomes in financial terms,” said Eva Halvarsson, CEO of the Second AP Fund.

“We are pleased to be able to undertake this investment since it is entirely in keeping with our mandate, which is both to maximise returns and to take ethical and environmental criteria into consideration. Through our sustainable development activities and the investments we make, the fund contributes in various ways towards to the UN’s Sustainable Development Goals and we try to be actively involved in these goals,” said Eva Halvarsson.

The Rise Fund measures how much tangible impact a potential investment is expected to have during its investment life cycle, with a focus on the impact outcomes defined by the UN Sustainable Development Goals. The impact assessment methodology was developed in collaboration with The Bridgespan Group, a leading non-profit advisor and resource for mission-driven organizations, philanthropists, and investors. The importance of using independent information to measure impact, together with TPG’s global reach, were key to AP2’s decision to invest in The Rise Fund.
For further details, please contact Eva Halvarsson, CEO of the Second AP Fund, on +46 (0)31 704 29 00, or Ulrika Danielson, Head of Corporate Communications, on + 46 (0)31 704 29 29.

The Ethical Council of the Swedish AP Funds celebrates ten years 2017. During these ten years the Council has through engagement encouraged the AP Funds’ global portfolio companies to improve their work on environmental issues, human rights and corruption. In 2016 dialogues have covered companies regarding the fishing industry in Thailand and the guest workers’ situation in Qatar.

Based on the mandate of the AP Funds the Ethical Council works with both preventive and reactive work with global companies in the AP Funds’ portfolios. The aim is to improve and have a positive impact regarding environmental and ethical issues in the operations of companies.

In 2016 the Ethical Council held dialogues in different sustainability areas totaling 316 companies worldwide. Biological diversity, anti-corruption and human rights continue to be examples of focus areas. The Council, for example, is engaged in a large number of dialogues on forced labor and child labor with the cocoa and tobacco industries. In 2016, the Ethical Council recommended the AP Funds to exclude the mining company Zijin Mining since the company has not responded to the Ethical Council’s demands for improvements on a policy regarding the discharge of mining waste in rivers, so called riverine tailings.

– The Ethical Council has during the past ten years worked with engagement as a means to solve problems and incidents that occur in business operations of investee companies. It is a sustainable strategy instead of selling the companies. To remain as owners and work for improvements was initially a bit of a unique approach from the AP Funds’ Ethical Council, but this has now evolved to become the standard for responsible investors. The Council has however, no plans to rest on its laurels, but continue to work on environmental issues, human rights and corruption, says Peter Lundkvist, Chairman of the Ethical Council in 2017.

Please find the new annual report for 2016 here.

For further details, contact:
Peter Lundkvist, Chair of the Ethical Council 2017, Phone: +46 (0)- 555 171 44 
John Howchin, Secretary-General, Ethical Council, Phone: +46 (0)8-555 171 76 
Email: info@etikradetapfonderna.se

The AP Funds’ Ethical Council
The AP Funds’ Ethical Council is a collaboration between the First, Second, Third and Fourth AP Funds, which are tasked by the Swedish Parliament with creating high returns at low risk for Sweden’s current and future pensioners. The Ethical Council is dedicated to contributing to the AP Funds’ long-term returns by encouraging companies to adopt responsible business praxis with regard to environmental and social issues.

The Second Swedish National Pension Fund (AP2) reported a total return on investment of 10.5 percent for the full twelve months, excluding expenses. Assets under management rose to SEK 324.5 billion. The net result was SEK 30.5 billion. The Fund’s performance in 2016 means that it has exceeded the long term targeted return in both the long and short term.

CEO, Eva Halvarsson, comments on the result:

“In the past year, we have been able to celebrate the fact that the fund capital achieved the highest level ever, SEK 324.5 billion, despite a record payment to the pension system which in 2016 amounted to SEK 6.6 billion.”

“Profit for the year shows that our globally diversified portfolio has generated solid results. All asset classes had a positive return in 2016, not least shares and bonds in emerging markets.”

“We think that our diversified portfolio will continue to generate a good return for Sweden’s pensioners. At the same time we realise that the return levels we have historically will become increasingly difficult to achieve, with such large part in fixed-income securities, with the applicable investment regulations for the AP funds.”

“It is gratifying to be able to state that the internalisation has provided the cost efficiency we predicted. The Fund’s total costs in relation to assets under management are now at the lowest level, except for 2007, and this is despite the fact that the portfolio has become increasingly complex with different asset classes in more and more markets.”

“During 2016 we implemented ESG factors in the global shares asset class in the quantitative management, which comprises approximately SEK 90 billion of the fund’s capital. In addition, we decided to include green bonds as part of the strategic portfolio, which represents an additional step in implementing sustainability issues in the portfolio management.”

In the past five years, the Fund’s average annual real return has totalled 10.8 percent and, over the past ten years, 4.7 percent.

• AP2’s assets under management totalled SEK 324.5 (300.6) billion on December 31, 2016, against which net outflows to the national pension system were charged in an amount of SEK – 6.6 (–4.9) billion.
• The Fund posted a net result for the year of SEK 30.5 (11.7) billion.
• The Fund’s return on the total portfolio was 10.5 (4.1) percent, excluding commission fees and operating expenses. Including these costs, the portfolio generated a return of 10.3 (4.0) percent.
• The relative return on the total portfolio, excluding alternative investments and costs, amounted to
  –0.4 (0.9) percent.
• Operating expenses, expressed as a percentage of asset management costs, remained low and amounted to 0.07 (0.07) percent.

The English version of the AP2 Annual Report 2016 will be available at www.ap2.se from beginning of March.

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

2016 was an eventful year for the Second AP Fund (AP2) in terms of sustainability. This was the result of a long-term and structured commitment, in line with the Fund’s primary mandate, to make sustainability integral to all activities.

Today, AP2 publishes its Sustainability & Corporate Governance Report for 2016. The Fund are determined to integrate sustainability throughout its operations, in our day-to-day activities as well as in our longer-term strategic planning. The Fund’s sustainability activities focus primarily on four priority areas that are considered essential to achieving a better long-term return; climate, corporate governance, diversity and transparency/reporting.

“For AP2, sustainability issues are intimately linked with the requirement to generate high return for Sweden’s pensioners. We are convinced that increased knowledge of these issues provides more comprehensive decision data, leading to better investment decisions. Consequently, sustainability is natural and important in all our activities and to all staff, essential to ensuring the best possible investments,” states Eva Halvarsson, CEO of the Second AP Fund.

Climate is one of the Fund’s focus areas, which means that these issues shall, where relevant, be integral to the analytical and decision processes employed for all asset classes. The ambition is to develop the portfolio in line with the two-degree target. The initial

focus of the Fund’s climate efforts will be to reduce the climate-related financial risks and contribute to a positive change.

“The opportunities consist of an ability to positively contribute to climate change, based on our mandate. By investing in sustainable strategies, such as green bonds, we help to limit climate change. By engaging in dialogue with companies and decision-makers

about sustainability, we are an important catalyst for change,” says Eva Halvarsson.

“One of our most important actions concerning sustainability during 2016 was to integrate ESG factors into the quantitative management of asset class global equities, which accounts for approximately SEK 90 billion of Fund capital. During 2016, our board also decided to include green bonds in our strategic portfolio, being the next step towards making sustainability concerns integral to the portfolio management process. During 2017, we shall be focusing still greater attention on opportunities within the field of sustainability. We must also prioritize those actions that best satisfy our mandated commitment to work for the good of Sweden’s pensioners,” says Eva Halvarsson.

The Second AP Fund Sustainability & Corporate Governance Report 2016, will be published in English in beginning of March, www.ap2.se.

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

The Second AP Fund has further integrated sustainability as part of its asset management strategy by incorporating ESG (Environmental, Social and Governance) factors into its quantitative management of asset class global equities. Consequently, SEK 90 billion of Fund capital is now managed in line with ESG considerations. A broader range of decision data enables better investment decisions, resulting in a higher return for Sweden’s pensioners.

The Second AP Fund makes sustainability an integral part of its asset management activities by incorporating sustainability factors into its analytical and decision processes. This enables the Fund to reduce risk and improve the potential for an increased return on investment. The Fund is convinced that companies committed to long-term sustainability are also those that generate solid long-term returns.

“One reason for making the integration of sustainability a priority in our asset management strategy is the conviction that it generates better long-term returns. Consequently, we have a comprehensive understanding of this area and a large number of staff who are keenly interested in these issues,” states Eva Halvarsson, CEO of the Second AP Fund.

Breadth of decision data
During the autumn, ESG factors have gradually been integrated into the Second AP Fund’s in-house developed mathematical model for asset class global equities. The implementation process is scheduled for completion before the end of the year, when ESG considerations will become integral to investment decisions, in conjunction with the other factors on which the model is based.

“We are one of few players in the industry to have taken this process to the next level, by analysing the basic data instead of relying on pre-determined ESG factors. It is vital to get as close to the basic data as possible, a recognition that is fully in line with the Fund’s overall approach to quantitative asset management,” notes Tomas Morsing, Head of Quantitative Strategies at the Second AP Fund.

On the one hand, the Second AP Fund’s ESG model comprises environmental factors of a concrete nature, such as the level of companies’ carbon emissions or how much energy they consume. On the other hand, the model also comprises data and indicators relating to social and corporate governance factors that may be said to provide an impression of the company.

Importance of values and corporate culture
An interesting observation made by the Fund is that companies featuring a high proportion of women in leading positions also note stronger growth, regardless of size or type of company. One possible explanation is that these companies are more focused on issues relating to values and corporate culture. This is reflected in the Fund’s measurable indicators, such as the proportion of women in leading positions or the range of in-company training.

The next stage of this process is to get still closer to a strategic working approach by developing an ESG-weighted index for quantitative equities management. Furthermore, in our management of global corporate bonds, we also plan to integrate ESG factors in the same way as we now do for equities.

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.

Today, the Second AP Fund (AP2) is releasing a publication regarding its approach to the transition towards a low-carbon economy. The Fund has also followed up its analysis of financial climate risks in t power utilities, deciding to divest in a further ten companies that it believes are exposed to significant financial climate risks.

Climate issues, in particular climate change, represent both enormous risks and big opportunities for a long-term investor like AP2. Climate change is likely to have a large effect on long-term returns. Therefore, AP2’s climate ambition is to develop the portfolio in line with the two-degree target. This is achieved by integrating climate analysis into the investment process and based on the Fund’s mission, contributing to a transition into a two-degree society.

In December 2015, 195 states agreed on a global climate agreement to reduce climate emissions. The agreement establishes that the global increase in temperature should be kept well below two degrees Celsius and that countries should strive to limit the increase to 1.5°C. The Paris Agreement strengthened AP2’s view that society are currently at the start of a transition into a low-carbon economy, giving growing importance to the integration of climate considerations into risk assessments and investment decisions.

“Given that AP2 is a long-term investor, it is clear to us, that our asset management needs to take into account the risks and opportunities associated with climate change and the transition into a society with zero net greenhouse gas emissions. In order to be able to assess our portfolio we need to have an idea of what the “target” looks like as well as metrics that can be used for assessment. That is precisely why we are constantly working on these issues. I hope this publication will provide some insight into why and how AP2 works with climate issues,” states Eva Halvarsson, CEO of the Second AP Fund.

Climate is one of AP2’s focus areas and to achieve our ambition to develop our portfolio in line with the two-degree target, the Fund is actively committed to include various types of climate information in its analyses and investment processes. Within the terms of its mission, the Fund also seeks investments that contribute towards the transition into a two-degree society.

The Fund’s work on climate issues has developed over a period of several years. This has included analyses of the potential climate risks associated with the Fund’s portfolios. Consequently, the Fund has divested companies dedicated exclusively to coal extraction and in oil and gas companies with major investments in new high-cost projects. Analyses have also been conducted to determine the climate-related financial risks associated with utility companies that operate coal-fired power stations, resulting in further divestment. In 2015, the Second AP Fund conducted an analyse of power utilities and identified 28 companies subject to financial climate risks, a significant portion of whose profits primarily were derived from the coal-fired generation of electricity. A follow-up carried out in 2016 identified an additional ten companies. In total, AP2 has divested from 76 companies due to financial climate risks.

Link to “Second AP Fund’s approach to the transition towards a low-carbon economy”: http://www.ap2.se/en/sustainability-and-corporate-governance/climate/ap2s-approach-to-the-transition-towards-a-low-carbon-economy/

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.