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.

The Second AP Fund (AP2) posted a net result of SEK 10.6 billion for the first half of 2016 and the Fund’s asset under management totalled SEK 308 billion. The Fund posted a total return of 3.7 percent, excluding costs. Relative to benchmark index, return was -0.7 percent, excluding alternative investments and costs.

“Despite turbulence on the financial markets, AP2 achieved a net return of 3.7 percent for the half year, and our total portfolio actually rose in value even during the final turbulent week in June. The ability to generate a stable return even during uncertain times is mainly attributable to the well diversified nature of our portfolio, both in terms of asset class and markets. Our long-term and well diversified approach is a key factor in the Fund’s success and an important contributor to its strong growth. Over the past ten years, the Fund has generated a return on invested assets of 80.7 percent, excluding costs, corresponding to an average annual return of 6.1 percent.” states Eva Halvarsson, CEO of the Second Swedish National Pension Fund.

• The Second AP Fund’s assets under management totalled SEK 308.0 (306.5) billion on June 30 2016, against which net outflows to the national pension system were charged in an amount of SEK -3.2 (-2.4) billion.
• The Fund posted a first-half net result of SEK 10.6 (15.0) billion.
• The Fund’s return on the total portfolio was 3.7 (5.2) percent, excluding commission and operating expenses. Including these costs, the portfolio generated a return of 3.6 (5.1) percent.
• The relative return on the portfolio of quoted assets, excluding alternative investments and costs, amounted to -0.7 (0.2) percent.
• 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 80.7 percent, excluding costs, corresponding to an average annual return of 6.1 percent. Less inflation, this is equivalent to an annual real return of 5.0 percent.
• During the first half of 2016, the Fund implemented one of the largest real-estate transactions ever carried out in Sweden when, together with the Sixth AP Fund, all joint holdings in Norrporten were sold to Castellum for SEK 14 billion.

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

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 Second AP Fund’s 2016 Female Representation Index (Female Index) reveals that the percentage of women on the boards of companies quoted on Nasdaq Stockholm continues to rise, currently amounting to 30.7 percent compared to 27.9 percent for the preceding year. The proportion of women on executive managements has also noted a steady increase, rising to 20.9 (19.5) percent for the year.

“It is highly pleasing that the proportion of women represented on corporate boards now exceeds 30 percent, as well as the fact that the proportion of women on executive managements has for the first time exceeded 20 percent. No less than 44.9 percent of newly elected board members are women. I believe this clearly demonstrates that stakeholders and nomination committees have become better at utilizing the full range of competence available – and that the pace of this change-process is accelerating,” states Eva Halvarsson, CEO of the Second Swedish National Pension Fund/AP2.
“If the pace of change noted over the past twelve years remains unchanged, it will be another 25 years before women fill 50 percent of the seats on corporate boards. The corresponding forecast for achieving 50 percent representation on executive managements is no less than 37 years. However, with a pace of change similar to the past three years, it will take ‘only’ 10 years before corporate boards and 23 years before executive managements achieve 50-percent female representation,” notes Eva Halvarsson.

The proportion of female directors on the boards of companies with a primary listing on Nasdaq Stockholm is now 31.9 (29.1) percent. The proportion of women on the executive managements of these companies is 21.2 (19.8) percent.

The proportion of female directors on the boards of all listed companies, excluding CEOs, totals 32.4 (29.5) percent, while the figure for primary listed companies is 33.6 (30.7) percent.

Of the 286 companies in the survey, 202 companies feature at least 25-percent female representation on their boards, compared with 170 companies in 2015. The boards of 27 companies lack any female members, while 80 companies have not a single woman on their executive managements. The proportion of female Chairs and CEOs also remains at a low level, although there has been a slight rise since last year, to 6.3 (5.2) and 5.2 (4.5) percent respectively.

The greatest overall increase in female representation at board and executive management level, at 34.8 and 22.8 percent respectively, has been achieved by the large-cap companies.

The Financial Services and Consumer sectors boast the highest number of women on their boards, at 37.5 and 33 percent respectively, while the highest percentage of women on executive managements is found in the Financial Services sector, at 30.4 percent. The Commodities sector distinguishes itself by featuring the lowest proportion of female board members. Nevertheless, all sectors increased the percentage of female representation on their boards.

Read the report (PDF document, 704 kB)

Background to the AP2 Female 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 2016 survey comprised 286 primary and standard-listed companies on Nasdaq Stockholm. 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.

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

The figures refer exclusively to companies quoted on Nasdaq Stockholm, unless otherwise stated.

The Second AP Fund is further reducing its exposure to financial risk in the fossil-fuel production sector. The Fund is consequently divesting its shares in an additional eleven coal and eight oil-and-gas production companies. These combined holdings have a total market worth of approximately SEK 550 million.

In 2014, the Second AP Fund conducted its first risk assessment of fossil-fuel production companies, focusing on the potential climate impact, subsequently deciding to divest its holdings in a total of 20 companies. The Fund conducts an annual follow-up of this climate-risk assessment, based on established criteria, to determine which companies fulfil such criteria. Subsequent to the follow-up conducted on December 31st 2015, the Fund is divesting holdings in a further eleven coal and eight oil-and-gas companies. The Fund has no holdings in the newly identified coal companies. A single oil-and-gas production company has been reinstated on the Fund’s benchmark index, as in this case, the Fund’s criteria for divestment no longer apply. In all, the Fund has now divested its holdings in 23 coal and 15 oil-and-gas companies.

“In assessing the financial impact of climate risks on portfolio companies, the Fund’s concern is to determine whether the risks these companies face have been factored into their market price. Both our analysis of fossil-energy companies and our assessment of the energy sector at the close of last year have been conducted in strict adherence to the Fund’s stated mission, namely: to take ethical and environmental concerns into account, without abandoning the broad goal of a maximum return on assets. This is why these analyses adopt a financial perspective. Disinvestment from these companies serves to protect the Fund’s long-term return on invested assets,” states Eva Halvarsson, CEO of the Second AP Fund.

The majority of turnover generated by the coal companies identified for disinvestment by the Fund derives from the sale of thermal coal. The negative environmental and health risks associated with the climate impact of this fossil fuel pose substantial financial risks.
In the case of oil-and-gas companies, the Fund has identified a number of companies featuring substantial exposure in high-cost projects, such as oil-extraction from oil sands. The Fund believes these companies face serious climate-related financial risks and that it is highly likely that these projects may either find themselves ‘stranded’ or prove unprofitable.

The Fund’s holdings in the 19 companies that have been identified amounted to a total market value of about SEK 550 million. The Fund has sold all its shares in the companies identified. The capital released has been reinvested across all sectors.

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

First-ever global finance facility to help close the global credit gap for women

The Second Swedish National Pension Fund, AP2, is taking yet another important step in the field of sustainability and today announced a $30MM investment in the Women Entrepreneurs Opportunity Facility (WEOF), the Goldman Sachs 10,000 Women and International Finance Corporation’s (IFC) partnership to increase access to capital for women entrepreneurs. Launched in 2014, the first-of-its-kind $600 million finance Facility aims to spur lending in developing countries to help close an estimated $285 billion global credit gap for women-owned small and medium enterprises (SMEs) and enable up to 100,000 women entrepreneurs to grow their businesses.

“Women in developing countries are an under-utilized resource, capable of boosting company profits and contributing to increased prosperity. They are often hampered by poorer employment conditions and lower incomes than men, as well as a lack of access to the capital needed to grow their businesses. They are also often prevented from owning and inheriting land and other assets. These are obstacles we wish to help them overcome, while also making a sound financial investment,” explains CEO Eva Halvarsson, AP2.

“Research has shown that investing in women entrepreneurs can drive significant global growth and opportunity and improve societies,” said Dina Habib Powell, head of Goldman Sachs’ Impact Investing business and president of the Goldman Sachs Foundation. “Increasingly, informed investors like AP2 are looking for innovative models that both make an impact and generate a return. This partnership with IFC, which has catalyzed new investments from both the public and private sectors, highlights the increased interest in investing in this space to close the capital gap for women-owned SMEs.”

IFC’s Banking on Women program is playing a catalytic role in helping financial institutions meet the needs of women entrepreneurs in a sustainable and profitable way. Since its launch in 2010, the program has made 33 investments globally totalling almost $1 billion.

Marcos Brujis, Global Director, Financial Institutions Group IFC said “Investing in women can change the face of the global economy, and is a strategic priority for IFC. This growing partnership and commitment will be critical in helping to close this credit gap, boosting support for women-owned SMEs, which can be key drivers of employment and economic growth.”

Since the Facility was launched in 2014, this public-private partnership, spurred by private sector innovation, has catalyzed new co-investments from both the public and private sectors. To date, it has made over 20 commitments to banks in 14 countries, increasing lending to 25,000 women entrepreneurs in countries from China to the Democratic Republic of Congo to Brazil. Goldman Sachs 10,000 Women and IFC provided anchor investments to create the Facility and are working with local banks in emerging markets to catalyze existing capital for women-owned SMEs by addressing barriers in the lending market such as unsuitable product offerings and credit terms.

“Part of our portfolio is invested in emerging markets and our perspective is very much based on a long-term approach. Through this investment we contribute to further long-term economic growth in these countries. This benefits our overall portfolio in the long term, which in turn benefits our pension fund beneficiaries. That we are simultaneously contributing to a better future for these women and their enterprises is something we can be proud of, and I hope others will join us in this type of investment initiative in future,” says Eva Halvarsson.

About AP2
The Second AP Fund (AP2) is one of northern Europe’s largest pension funds, managing approximately SEK 300 billion of Sweden’s national pension assets, which are invested worldwide. The Fund is tasked with generating a solid return on investment, while implementing a consistent policy of responsible and sustainable investment. www.ap2.se

About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence, to create opportunity where it’s needed most. In FY15, our long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org

About Goldman Sachs 10,000 Women
The Goldman Sachs 10,000 Women initiative is a campaign to foster economic growth by providing women entrepreneurs around the world with a business and management education and access to capital. The initiative has reached women from across 56 countries through a network of 100 academic, non-profit, and bank partners. In partnership with the International Finance Corporation (IFC), Goldman Sachs 10,000 Women launched a $600 million facility in 2014 to enable 100,000 women entrepreneurs to access capital.

Media Contacts:
Ulrika Danielson, AP2, +46 31 704 29 00, Ulrika.Danielson@ap2.se
Joe Stein, Goldman Sachs, +44 207 775 2523, Joseph.Stein@gs.com
John McNally, IFC, 202 458 0723, jmcnally@ifc.org

AP2 is ranked 8 in the world when it comes to managing climate risk by Asset Owners Disclosure Project (AODP).

AP2 received an AAA rating in this year’s Global Climate 500 Index.This is an improvement from last year when the fund ranked 11. AODP rates the world’s 500 largest investors on their success at managing climate risk within their portfolios. Scandinavian asset owners are taking the most action to manage climate risk and Sweden tops the Country Index. AP2 is ranked number two in Sweden and third in Scandinavia.

More information.

The Second Swedish National Pension Fund (“AP2”) and the Sixth Swedish National Pension Fund (“AP6”) today announce that they have entered a definitive agreement under which Castellum AB (publ) (“Castellum”) will acquire all outstanding shares in Norrporten AB (publ) (“Norrporten”) through a combination of cash and shares. Up until closing, the total consideration amounts to SEK 14.0 billion. The sale will result in the realisation of significant value increases. The value of Norrporten’s property portfolio has on average grown by 14% during 2000-2015.

The cash consideration amounts to approximately 78% of the total consideration for Norrporten and Castellum shares represent the remaining approximately 22%. Following the transaction, AP2 and AP6 will each own approximately 5% of the share capital and votes in Castellum.

AP2 and AP6 believe that this is the right time to divest their holdings in Norrporten, and thereby realise a significant capital increase to the benefit of Swedish pensioners. Castellum is one of Sweden’s largest and most renowned property companies and AP2 and AP6 look forward to become shareholders in Castellum.

– We are proud of Norrporten’s development since 2001. The sale to Castellum gives Norrporten the best possible environment for continued development. AP2 has been an owner in Castellum since 2002 and we look forward to increasing our ownership in the company. For AP2, the transaction will allow us to take another step in our investment strategy to increase the share of property investments on other markets, says Eva Halvarsson, CEO of AP2.

– Castellum is a large listed property company with significant experience and competence, and we believe that Norrporten will continue its successful development as part of the combined company. There is a clear logic for AP6 to divest its holding in Norrporten given that the investment has accounted for close to 25% of our total invested capital. It therefore makes sense for us to rebalance our portfolio through this transaction, which is the result of a comprehensive and well-structured sales process, says Karl Swartling, CEO of AP6.

The transaction requires approval from relevant authorities and the extraordinary general meeting’s approval of a rights issue at Castellum.

Rothschild has acted as principal financial advisor to AP2, AP6 and Norrporten, who also have been advised by Goldman Sachs International and Nordea. Vinge has acted as legal advisor.

For more information:
Eva Halvarsson, CEO Second Swedish National Pension Fund, +46 31 704 29 11
Ulrika Danielson, Head of Corporate Communications, +46 31 704 29 29

Karl Swartling CEO, Sixth Swedish National Pension Fund, +46 31-741 10 04
Ulf Lindqvist, Director of communications, +46 708 74 10 48, ulf.lindqvist@apfond6.se

The Ethical Council of the Swedish AP Funds has an important task – to encourage portfolio companies to enhance their performance on environmental and social issues. The AP Funds are long-term, responsible and committed investors. The Ethical Council’s dialogues with companies make a difference. During 2015, the Ethical Council conducted dialogues with 178 companies around the world concerning a total of 254 incidents, pertaining mainly to business ethics, human rights, labour rights, corruption and the environment.

In 2015, the Ethical Council has conducted dialogues with some 178 companies around the world, involving various aspects of sustainability. During the year, the Council has recommended that the AP Funds exclude two companies, Motorola Solutions and Larsen & Toubro, consequent to their contravention of conventions to which Sweden is a signatory. Over the nine years in which the Ethical Council has been active, it has recommended that the AP Funds exclude a total of 19 companies. Four of these recommendations were retracted in 2015, after the companies in question terminated the activities that had originally motivated the Council’s recommendation for exclusion.

“The Ethical Council’s basic premise is that the AP Funds shall abstain from investment in companies that systematically violate the international conventions to which Sweden is a signatory. Should problems be encountered, the Ethical Council becomes actively involved, with a view to promoting improvements,” says Ulrika Danielson, who chairs the Ethical Council in 2016.

Based on the AP Funds’ joint mission and common code of values, the Ethical Council works preventively and reactively to make a difference on environmental and ethical issues. Preventive initiatives are of increasing importance in persuading companies and industries to act more responsibly. During 2015, the Ethical Council has been involved in a number of proactive initiatives, some of which have been industry-specific, including the palm oil and cocoa industries, others addressing companies on emerging markets. Focus areas highlighted during the year have featured human rights, corruption and climate issues.

“During the first nine years of the Ethical Council’s operation, approaches, principles and work processes have been developed that have subsequently become role models in the industry. When we started in 2007, the Ethical Council engaged primarily in reactive dialogue with portfolio companies. Today, the Council has developed to primarily focus on proactive dialogues and various industry initiatives,” says Ulrika Danielson.

Learn more about the Ethical Council’s corporate dialogues and other activities in the 2015 Annual Report, which can be downloaded from the Ethical Council’s homepage at www.etikradet.se or here (PDF-document, 1,9 MB).

For further details, contact:
Ulrika Danielson, Chair of the Ethical Council 2016, Phone: +46 (0)31-704 29 29 
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 AP Fund allocates one percent of its total strategic portfolio to ‘green bonds’, making this asset class part of the Fund’s broad investment strategy. This marks a new strategic approach with regard to the Fund’s investments in sustainability – and a further step along the way to making sustainability an integral part of the asset-management process.

The Second AP Fund has decided to allocate one percent of its total strategic portfolio to ‘green bonds’ and to benchmark this allocation against the Barclays/MSCI Green Bond Index. This is a strategically important decision that will further enhance the Fund’s efforts in the field of sustainability. Furthermore, the Fund has additional investments in green and social bonds, which are managed as part of its existing portfolio of global bonds. The Fund’s total current investments in green bonds amount to SEK 4.2 billion.

‘Green bonds’ is a collective term for bonds issued with a view to funding environment-related investments. The Second AP Fund’s fixed-income portfolio management team has extensive experience of sustainable investment. When the Fund first invested in green bonds, in 2008, it was one of the first in the world to invest in this asset class.

“The percentage of green bonds featured in the active bond portfolio has risen sharply in recent years and we feel that the market has now achieved a maturity and size to justify a separate investment strategy and their definition as an individual asset class. We are therefore breaking out our holdings in green bonds from the fixed-income portfolio, to manage them in accordance with a dedicated investment strategy. This strategic move offers the Fund clear means of combining solid returns with an allocation of resources to the global sustainability challenge,” says Lars Lindblom, portfolio manager at the Second AP Fund.

“We are a player engaged in investment on the global bond market. The return we require on green bonds in no way differs from other investments, although our preference is a green bond rather than another instrument of similar value,” states Lars Lindblom.

For further details, please contact Lars Lindblom, portfolio manager (fixed-income) at +46 (0)31-704 29 00, or Ulrika Danielson, Head of Communications, at +46 (0) 31 704 29 29.

The Second Swedish National Pension Fund (AP2) reported a total return on investment of 4.1 percent for the full twelve months, excluding expenses. Assets under management rose to SEK 300.6 billion. The net result was SEK 11.7 billion. The relative return on the total portfolio, excluding alternative investments and costs, amounted to 0.9 percent. The Fund’s performance in 2015 means that it has exceeded targeted return in both the long and short term.

CEO, Eva Halvarsson, comments on the result:

“Early 2015 saw the AP2’s total assets under management pass the SEK 300 billion mark for the first time. This should be compared with the SEK 134 billion the Fund started with in 2001. Furthermore, AP2’s total result has amounted to SEK 175.3 billion since the Fund’s inception.

“Especially in light of the overall market development during the year, it is gratifying to note that our active management of assets generated a relative return of 0.9 percent. Our portfolio of Swedish equities enjoyed an excellent year, producing an excess return of SEK 1.6 billion.”

“The internalization process initiated in 2012 was completed as planned in 2015. This internalization process means that, over some three years, assets of more than SEK 50 billion have reverted from external to internal management. The in-house management of this capital will mean a significant cost saving, while also enabling us to better utilize and develop the high levels of competence within the Fund.”

“In 2015, we advanced a step further in ESG field, by formalizing an overall strategy. Our vision is to make ESG an integral part of all analytical and investment processes. In implementing this strategy, based on a financial risk perspective, we will focus on four target areas – climate, diversity, reporting and governance.”

In the past five years, the Fund’s average annual real return has totalled 7.8 percent and, over the past ten years, 4.8 percent.

• AP2’s assets under management totalled SEK 300.6 (293.9.7) billion on December 31, 2015, against which net outflows to the national pension system were charged in an amount of SEK – 4.9 (–5.1) billion.
• The Fund posted a net result for the year of SEK 11.7 (34.3) billion.
• The Fund’s return on the total portfolio was 4.1 (13.3) percent, excluding commission fees and operating expenses. Including these costs, the portfolio generated a return of 4.0 (13.1) percent.
• The relative return on the total portfolio, excluding alternative investments and costs, amounted to 0.9 (0.5) percent.
• Operating expenses, expressed as a percentage of asset management costs, remained low and amounted to 0.07 (0.07) percent.
• During the year the First and Second Swedish National Pension Fund together with TIAA-CREF have combined forces in a new joint venture to create a leading, pan-European office investment platform, Cityhold Office Partnership.

* In the half-year report, the asset management cost ratio is shown on a full-year basis.
** In the half-year reports, annualised return is shown as 10.0 and 5.0 years respectively.

The English version of the AP2 Annual Report 2015 will be available at www.ap2.se from end 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.