Carbon footprint - Andra AP-fonden

AP2 began to analyse the equity portfolio’s carbon footprint in 2009. As of 2014, measurements have been taken annually. By collecting data from all the companies in the portfolio, based on the Fund’s stake in their respective companies, the holdings’ total emissions of carbon dioxide are calculated.

Carbon footprint of listed equity portfolio, Scope 1 and 2

Metrics	2022	2021	2020
1. Total carbon emissions (million tCO2e)	1.05	1.17	1.44
Sweden	0.05	0.07	0.09
Developed markets	0.33	0.40	0.51
Emerging markets	0.67	0.70	0.84
Change in the portfolio’s total carbon emissions from the previous year (%)	–9.8	–18.8	–14.6
– of which the change related to changes in the portfolio’s holdings (% units)	–15.2	–9.3	–17.3
– of which the change related to changes in the companies’ emissions (% units)	5.4	–9.5	2.7
2. Relative carbon emissions (tCO2e/SEKm)	6.97	6.23	8.92
Sweden	1.49	1.75	2.58
Developed markets	4.61	4.25	6.70
Emerging markets	14.48	13.41	16.40
3. Carbon intensity (tCO2e/SEKm)	8.82	10.09	12.73
Sweden	2.90	4.78	5.07
Developed markets	6.48	7.48	9.97
Emerging markets	13.10	14.77	18.85
4. Portfolio-weighted carbon intensity (TCFD)(tCO2e/SEKm)	7.68	8.97	12.27
Sweden	2.78	3.48	4.15
Developed markets	6.92	8.10	10.93
Emerging markets	12.32	14.95	19.63
Change in the portfolio’s carbon intensity (TCFD) from the previous year (%)	–14.3	–26.9	–22.8
– of which the change related to changes in the portfolio’s holdings (% units)	5.8	–4.1	–33.4
– of which the change related to changes in the companies’ carbon intensity (% units)	–20.1	–22.8	10.6
Market value of the Fund’s portfolio covered by CO2e data (SEKbn)	151	187	161
Proportion of the share capital for which data is available (%)	100	100	99

Carbon measurements as of and including 2020 are based on a broader universe of carbon data and a refined method of estimating greenhouse gas emissions from nonreporting companies. As companies in the portfolio improve and increase their reporting of carbon data, AP2 also revises historical data. There may therefore be deviations in comparison with previous reports.
1. Total carbon emissions. Total of owned share of portfolio companies’ individual carbon emissions.
2. Relative carbon emissions. Total of owned share of portfolio companies’ individual carbon emissions in relation to the portfolio’s market value.
3. Carbon intensity. Total of owned share of portfolio companies’ individual carbon emissions in relation to the total of owned share of the portfolio companies’ turnover.
4. Portfolio-weighted carbon intensity (TCFD). The metric adds together the individual carbon intensity of each portfolio company, i.e. a company’s carbon emissions in relation to its turnover, weighted according to each individual company’s share of the portfolio.

The formulae for the above indicators are available on the Fund’s website.

CO₂e (carbon dioxide equivalent) is a unit of measurement that enables comparisons of the climate impact of different greenhouse gases.

During 2015, the Fund was instrumental in obtaining a standardisation among investors of the measurement method of a carbon footprint.The AP Funds has coordinated how to report on carbon footprint. See fact sheet.

From 2015 the AP Funds’ carbon footprint will be calculated for holdings as of December 31 of the current year using the latest available carbon data for direct emissions (Scope 1) and indirect emissions from energy (Scope 2). The First, Second, Third, Fourth and Seventh AP Funds will calculate and report the carbon footprint of their respective listed equity portfolio shareholdings. The Sixth AP Fund will report on these indicators for their unquoted equity portfolio based on their shareholdings.

The AP2’s ambition is to eventually be able to report on a carbon footprint that includes all asset classes. Read more about AP2’s carbon footprint calculations in its Annual Report and the Sustainability Report.

Carbon footprint benefits

Provides basis for determining certain climate-related financial risks and for pricing carbon emissions.
Can provide a basis for influencing companies concerning requirements for emission-reduction targets, risk management, business strategies and transparency.
Improves AP Funds’ transparency and encourages greater transparency within the business community as well as promoting the provision of higher-quality data.

Carbon footprint limitations

Fails to assess the investments’ total climate impact because:
- Only certain emissions are included
- Emissions data from companies is incomplete
- Only certain asset classes are assessed
- Reductions in emissions derived from products and services not included
- Information about fossil-based reserves not included.
Fails to assess a portfolio’s total climate risks, such as the physical risks of extreme weather, flooding and drought or the consequences of more stringent legislation governing energy efficiency. Nor is a carbon footprint a reliable measure of a portfolio’s overall climate potential or how well it is positioned for transition to a carbon-efficient society.
Fails to assess what is required to achieve the CO2 target and provides no guidance on how investors can help achieve it. A narrow focus on the reduced footprints of individual portfolios risks diverting attention from actual emission reductions and ways for investors to realize solutions for achieving a carbon-efficient economy.