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, 2 and 3

Metrics	2023	2022	2021
1. Carbon emissions, Scope 1 and 2, EVIC (million tCO₂e)	0.40	0.62	0.69
Sweden	0.03	0.04	0.07
Developed markets	0.17	0.28	0.33
Emerging markets	0.20	0.30	0.29
2. Carbon emissions, Scope 3, EVIC (million tCO₂e)	3.42	4.58	5.44
Sweden	0.98	1.17	1.05
Developed markets	1.45	1.94	2.77
Emerging markets	0.99	1.47	1.62
Carbon emissions, Scope 1–3, EVIC (million tCO₂e)	3.82	5.20	6.13
Change in the portfolio’s total carbon emissions from the previous year (%)	-26.9	-14.6	22.9
– of which the change related to changes in the portfolio’s holdings (% units)	.26.4	-35.8	3.2
– of which the change related to changes in the companies’ emissions (% units)	-0.5	21.3	19.7
3. Relative carbon emissions, Scope 1 and 2, market value (tCO₂e/SEKm)	4.48	7.43	6.35
Sweden	1.13	1.67	1.95
Developed markets	3.71	8.17	5.36
Emerging markets	8.30	16.37	14.8
4. Portfolio-weighted carbon intensity (WACI), Scope 1 and 2, market value (tCO₂e/SEKm)	5.68	8.21	9.04
Sweden	2.14	3.07	3.64
Developed markets	5.41	14.65	13.4
Emerging markets	8.79	12.31	15.00
Portfolio-weighted carbon intensity (WACI), Scope 1–3, market value (tCO₂e/SEKm)	52.9	72.1
Change in the portfolio’s carbon intensity from the previous year (%)	-26.7
– of which the change related to changes in the portfolio’s holdings (% units)	-27.6
– of which the change related to changes in the companies’ carbon intensity (% units)	0.9
Market value of the Fund’s portfolio covered by CO₂ e data (SEKbn)	158	151	187
Proportion of the share capital for which data is available (%)	100	99.9	99.8

Carbon measurements as of and including 2019 are based on a broader universe of carbon data and a refined method of estimating greenhouse gas emissions from
non-reporting companies. As companies in the portfolio improve and increase their reporting of CO₂e data, AP2 also revises historical data. There may therefore be deviations in comparison with previous reports.
1. Carbon emissions, Scope 1 and 2. Total of owned share of portfolio companies’ individual carbon emissions (Scope 1 and 2) based on company value as above.
2. Carbon emissions, Scope 3. Total of owned share of portfolio companies’ individual carbon emissions (Scope 3) based on company value as above.
3. Relative carbon emissions, Scope 1 and 2. Total of owned share of portfolio companies’ individual carbon emissions based on company value as above in relation
to the portfolio’s market value.
4. Portfolio-weighted carbon intensity (WACI), Scope 1 and 2. Total 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.

This means that AP2’s carbon footprint in the future will be calculated for holdings as of 31 December of the current year using the latest available carbon dioxide data for direct emissions (Scope 1) and indirect emissions from energy (Scope 2) and emissions in the company’s entire value chain (Scope 3 ) that is, from the production of purchased materials to the emissions during the use of the company’s product and possible waste management of the product. The company’s emissions such as business trips and other emissions that the company causes, but does not directly own or control, are also included.

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.

Carbon footprint for all asset types, Scope 1, 2 and 3

Carbon footprint for all of AP2’s asset classes see page 28 in Sustainability Report 2023. Link.