The Swedish Government has appointed Kristina Mårtensson as a new member of AP2’s board.

At yesterday’s annual general meeting at Statoil, the Second AP Fund, together with the Fourth AP Fund, submitted a shareholder proposal. The proposal was supported by 99.95 percent and it was proposed that the company will expand its reporting regarding: greenhouse gas emissions, evaluating project portfolio against relevant post-2035 scenarios, the company’s plans in terms of research and development for “low-carbon” energy and how the company takes sustainability into their strategic key indicators and bonus system. The Board of Statoil had recommended the shareholders to support the proposal.

Earlier this spring, AP2, together with a large number of other investors, presented the same shareholder proposal on Shell’s and BP’s annual meetings. These proposals were supported by 98.9 percent and 98.28 percent.

AP2 is ranked 11 in the Asset Owners Disclosure Project’s (AODP) index of the world’s 500 largest investors. AODP has ranked the investors according to the level of effort they put towards mitigating climate risk.

Link to AODP’s homepage.

AP2 have, together with AP4, submitted a shareholder proposal for Statoil’s AGM. It is proposed that the company will expand its reporting regarding: greenhouse gas emissions, evaluating project portfolio against relevant post-2035 scenarios, the company’s plans in terms of research and development for “low-carbon” energy and how the company takes sustainability into their strategic key indicators and bonus system. The Board of Statoil recommends that shareholders to support the proposal.

Ulrika Danielson and Arne Loow representing AP2 and AP4 comment the proposal: “Since oil-related energy companies have challenges ahead in terms of both financial and environmental issues, we see this resolution as a good tool to help Statoil to strengthen its reporting on climate change issues.”

Earlier this spring, AP2, together with a large number of other investors, presented the same shareholder proposal on Shell’s and BP’s annual meetings. The boards of these companies recommended all shareholders to support the proposal. On BP’s annual meeting the proposal was voted through. Statoil’s and Shell’s annual meetings are held on May 19.

Link to the resolution (PDF-document, 131 kB)

Read the recommendation from the Board of Statoil.

Among over 1000 pension funds, the Secon AP Fund´s Sustainability and Corporate Governance Report 2013/2014 has been nominated in the Responsible Investor Reporting Awards 2015.

Winners will be announced on 2-3 June in London.

Read more

The Ethical Council of the AP-Funds builds its process on dialogue with companies both when problems arise in their business and for preventive measures. During 2014 the Ethical Council totaling 308 dialogues and completed three reactive dialogues. The Ethical Council has recommended the AP-Funds to exclude the companies Agrium, Motorola Solutions and Barrick Gold who all have been associated with violations of international conventions.

The Ethical Council has for several years been working with preventive dialogues in order to get companies to act more responsibly and thus reduce the risk that they violate international conventions. A comprehensive preventive project have been focused on the mining industry, where the Ethical Council between 2011 and in 2013 undertook extensive analysis and engagement together with other investors. During the autumn of 2014 the project was evaluated with very positive results on all the parameters measured.

“Preventive and proactive projects are important for the Ethical Council and it is important that these lead to concrete and positive results. Engagement makes a difference.” says Ossian Ekdahl, chairman of the Ethical Council for 2015.” Reactive, event-driven dialogues will always be a part of the Council’s work, but preventive projects is often a better way to achieve change where the companies are more receptive to suggested improvements, in order to avoid future problems.”

In 2014 the Ethical Council conducted 308 dialogues and completed three reactive dialogues.

In three of the dialogues the Ethical Council came to the conclusion that further dialogue was not meaningful and therefore recommended the AP-funds to exclude the companies. The Ethical Council has recommended exclusion of Barrick Gold due to serious negative environmental impact by depositing tailings in river system. The recommendation to exclude Motorola Solutions is based on their involvement in customized monitoring systems for settlements in the occupied parts of the West Bank and finally the company Agrium that intends to continue to buy and use phosphates from the occupied Western Sahara. All funds have followed the recommendations of the Ethical Council.

For further information please contact:

Ossian Ekdahl, Chairman of the Ethical Council 2015
Phone: 0046 (0)8 566 20 209

John Howchin, Secretary-General of the Ethical Council
Telephone: 0046 (0)8 566 20 247

E-mail: info@etikradetapfonderna.se

The Ethical Council is a collaboration between the First, Second, Third and Fourth Swedish National AP-Fund with the goal to influencing companies to a more sustainable business. The Ethical Council was formed in 2007. Our guiding principle is to make a difference by being long-term, responsible and engaged owners that influence companies to improve their work on environmental and social issues. The Ethical Council does that, both by having preventive initiatives and by dialogue with a number of companies that are linked to violations of international conventions on the environmental and human rights issues.

Annual Report 2014 Ethical Council (PDF document, 3,4 MB)

The Second AP Fund reported a total return on investment of 13.3 percent for the full twelve months, excluding expenses. Fund capital rose by SEK 29.2 billion, totalling SEK 293.9 billion. The net result was SEK 34.3 billion. The relative return on the total portfolio, excluding alternative investments and costs, amounted to 0.5 percent. The Fund’s performance in 2014 means that it has exceeded targeted return in both the long and short term.

“After fourteen years operations, today’s Fund is a mature, efficient organization with a clearly defined strategy, well equipped to meet still greater future turbulence, which developments this year amply demonstrate. We have a broad and well diversified portfolio and all asset classes have contributed to the year’s strong results. Our active portfolio management has generated an excess return of 0.5 percent, contributing SEK 1.1 billion to the national pension system. It is also highly positive that we have been granted a permit for further investment in listed Chinese equities, given the fact that this portfolio generated a return of no less than 59.1 percent in 2014,” states Eva Halvarsson, CEO of the Second AP Fund.

In the past five years, the Fund’s average annual real return has totalled 8.7 percent and, over the past ten years, 6.1 percent. For the sixth year in succession, net outflows to the pension system were negative, which means that the Fund once again paid out more to the pension system to cover the shortfall than it received in the form of pension contributions. As of year-end 2014, the Fund had contributed SEK 25 billion to cover the shortfall in the pension system.

• The Second AP Fund’s assets under management totalled SEK 293.9 (264.7) billion on December 31, 2014, against which net outflows to the national pension system were charged in an amount of SEK – 5.1 (– 6.9) billion.

• The Fund posted a net result for the year of SEK 34.3 (30.1) billion.

• The Fund’s return on the total portfolio was 13.3 (12.8) percent, excluding commission costs and operating expenses. Including these costs, the portfolio generated a return of 13.1 (12.7) percent.

• The relative return on the total portfolio, excluding alternative investments and costs, amounted to 0.5 (0.4) percent. Over the past five years, the average real return was 8.7 percent.

• Over the past decade, the Fund has generated a return of 102.5 percent, corresponding to an average annual return of 7.3 percent. After a deduction for inflation, this corresponds to an annual real return of 6.1 percent.

• Operating expenses, expressed as a percentage of portfolio management costs, remained low and amounted to 0.07 (0.07) percent.

• For the second time, the Second AP Fund has chosen to analyse and calculate the carbon footprint for its portfolio of equities. Fund investments in equities represent 2 204 000 tCO2e, corresponding to 17 tCO2e per invested SEK million kronor.

Post-report events:

• In January 2015, the Second AP Fund’s capital assets exceeded SEK 300 billion.

• In January 2015, the Fund received permission to invest a further USD 200 million in equities listed on China’s domestic markets. The Fund had already received its first permit in 2013, for a corresponding amount.

Read the entire annual report (pdf) on the Second AP Fund website at www.ap2.se

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.

Since its inauguration in 2001, the Second AP Fund has conducted a whole range of activities in the field of sustainability, having many times been a pioneer. For example, the Fund was among the first investors in the world to become a signatory to the UN’s Principles for Responsible Investment (PRI), as well as being one of the first to invest in ‘green bonds’. As early as 2009, the Fund had started to analyse the carbon footprint of its stock portfolio and, from the very start, has championed the issue of increased diversity on the boards and in the executive managements of publicly quoted companies.

Today, the Second AP Fund publishes its Sustainability & Corporate Governance Report for the period 2013/2014. Features include the Fund’s report on the implementation of the PRI, a report on the Farmland Principles and a description of the Fund’s progress in implementing sustainability into the investment process.

“During the year, we have continued our in-house focus on integrating sustainability into the asset management process. Our long-term goal is to integrate sustainability into all of the Fund’s analytical and investment processes,” states Eva Halvarsson, CEO of the Second AP Fund.

Over the period, the Fund has also been engaged in developing a broader sustainability strategy, mainly with a view to further prioritizing and focusing on its work.

Considerable attention is being devoted to the climate issue. One consequence is that the Fund has conducted a comprehensive risk analysis of all the fossil-fuel based energy companies in its stock portfolio, to determine their potential impact on the climate. Yesterday, as a consequence of this analysis, the Second AP Fund announced that it would divest from 20 fossil-fuel based energy companies.

“As early as 2009 we conducted an extensive project to analyse the carbon footprint of the total portfolio. We are now once again in the process of analysing the portfolio’s carbon footprint, and the results will be published in the Fund’s 2014 Annual Report,” says Eva Halvarsson.

In the coming year, to improve transparency, audits of the Fund’s holdings in agricultural real estate in Brazil will be conducted by an independent agency. These will review how efficiently the “Principles for Responsible Investment in Farmland” have been implemented, Principles that the Fund has endorsed and that are now integrated into the broader framework of the PRI. See the Second AP Fund Sustainability & Corporate Governance Report, 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 is reducing its financial risk in fossil-fuel based energy. Consequently, it will no longer have investments in 12 coal and 8 oil-and-gas production companies. This comprises holdings with a total market value of about SEK 840 million.

Following a comprehensive risk analysis of all Second AP Fund holdings in fossil-fuel based energy companies, based on climate impact, the Fund has decided that it will no longer invest in 12 coal and 8 oil-and-gas production companies.

“Our starting point for this analysis has been to determine the financial risks associated with the energy sector. By not investing in a number of companies, we are reducing our exposure to risk constituted by fossil-fuel based energy. This decision will help to protect the Fund’s long-term return on investment,” says Eva Halvarsson, CEO of the Second AP Fund.

The majority of the turnover generated by the coal-production companies identified in the Fund’s analysis derives from the sale of thermal coal. These companies face considerable climate-related financial risk, due to the negative environmental and health impacts of coal, which affect demand. Furthermore, coal-powered electricity production is subject to competition from gas and renewable energy.

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 be stranded or unprofitable.

The Fund’s holdings in the 20 companies that have been identified amount to a total market value of about SEK 840 million.

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.

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.