AP2’s framework
Guided by the State’s values and the UN Guiding Principles, we work toward a sustainable future where human rights are central.
Our Role, Principles, and Commitment
AP2 is a government pension fund governed by law, which stipulates that the Fund must invest responsibly and exercise responsible ownership. The Fund shall contribute to sustainable development without compromising on return or risk. Respect for human rights is central to achieving the Sustainable Development Goals adopted by the UN and is a key part of AP2’s mandate.
Our vision is to be a leading pension fund manager in a changing world. To achieve this, sustainability is integrated into all investment decisions, and human rights are a priority area.
AP2’s values are based on the State’s principles and international conventions ratified by Sweden. We respect human rights and adhere to the UN Guiding Principles on Business and Human Rights (UNGPs). Our responsibility is to prevent and address adverse impacts on human rights that we may cause, contribute to, or be directly linked to.
Sustainability and responsibility permeate the entire organization and are reflected in our business plan, policies, and practices.
Our Human rights policy
AP2’s Human Rights Policy is part of the business plan approved annually by the Board. The policy was developed by the Fund’s own experts together with the management. During this process, AP2 also received support from Shift, which has leading expertise in the UN Guiding Principles.
The Human Rights Policy is shared with all employees through internal training and is available on the Fund’s intranet. External stakeholders can find it on AP2’s website. We communicate our commitment by referring to it in dialogues with external managers and companies we invest in.
The policy currently covers all fundamental human rights, as AP2 may be exposed to various types of human rights risks. For this reason, the Fund does not have separate policies for different rights.
The policy applies to all individuals who may be affected adversely by the Fund’s activities or through our business relationships.
Read more about the Fund’s values and commitments in AP2’s Human rights policy.
Expectations of portfolio companies and external managers
AP2 expects portfolio companies and external managers to comply with international standards that protect human rights. They must act in accordance with the UN Guiding Principles and the UN Global Compact. To ensure this, we use side agreements that require external managers to operate in line with these principles.
Read more about AP2’s expectations of portfolio companies and external managers.
Our work on human rights
AP2 may cause, contribute to, or be directly linked to a wide range of human rights risks through its own operations or via business partners, suppliers, and investments.
How we manage human rights risks
AP2 has assessed that its most severe risks lie within investment management. For example, if the Fund invests in companies that negatively impact human rights. Those affected may include portfolio company employees, supply chain workers, consumers, and local communities.
Our approach to address our risks are grounded in human rights due diligence. This means we regularly:
- Identify potential and actual impacts.
- Assess and prioritize risks based on severity (scale, scope, and remediability).
- Mitigate and prevent harm.
- Track and report progress transparently.
We focus on risk to people, not financial risk, and apply tailored processes across asset classes.
Key Principles
- Alignment with UNGPs and international standards.
- Distinction between potential impacts (risk of harm) and actual impacts (harm occurred).
- Validation through internal and external expertise.
- Continuous improvement and transparency.
Due Diligence in high-risk countries
AP2 identifies and manages risks in countries with a very high likelihood of severe human rights violations. The process is overseen by the Fund’s Country Committee, which includes senior management.
The process covers:
- Listed assets in a country, such as equities, government bonds, and credits, which accounts for approximately 68 percent of the Fund’s assets under management.
Risk Identification
We use external data to identify countries with high human rights risk. All countries are reviewed twice a year, and new countries are assessed before investment. The assessment focuses on the severity and scale of violations and whether the state is responsible.
Risk Assessment
If a country is assessed as very high risk, we conduct deeper analysis with input from human rights experts. The Fund weighs financial objectives against its responsibility to respect human rights, including the implications of divestment and opportunities for engagement.
Risk Management
If a high-risk country remains in the portfolio, the Fund actively engages through dialogue with policymakers, companies, and external managers. We also collaborate with other investors to increase leverage.
Tracking and Reporting
The Country Committee reviews the process at least twice a year, including risk assessments, engagement efforts, and outcomes.
Countries that have been divested are monitored and may be reincluded if conditions improve in a lasting and meaningful way.
Activities and results are reported in the Fund’s sustainability report.
Due Diligence in listed equities
We work proactively to identify and mitigate potential risks in listed equities.
The process covers:
- Listed Swedish and global equites, which account for approximately 40 percent of the Fund’s assets under management.
Risk Identification
We use a data-driven model to identify sectors and countries with high risk of human rights breaches, such as child labour or discrimination. The model also detects heightened risk combinations (e.g., a specific sector in a high-risk country). It is updated regularly to track changes over time. Risk identification is conducted twice a year.
Risk Assessment
Results are validated through expert consultations to prioritize the most severe risks, with special attention to vulnerable groups such as women, children, and minorities.
Sectors or specific companies are identified for further action.
Risk Management
AP2 works proactively to mitigate risks through engagement activities. Depending on the specific issue, engagement may be conducted directly, via collaborations such as various investor initiatives, or through the Council on Ethics. Engagement can target individual companies through direct dialogue, or be directed at an entire sector to drive systemic change.
Tracking and Reporting
Companies progress is evaluated annually against milestones. Areas that are evaluated are commitments, policies, risk management processes, grievance mechanisms, remediation, and transparency. Depending on outcomes, AP2 may continue engagement, end dialogue, or divest.
AP2 reviews the Fund’s overall human rights risk level in listed equities twice a year and reports this to the Board.
Activities and results from this work are reported in the Fund’s sustainability report.
Due diligence in unlisted assets
We set high expectations for external managers and monitor risks in unlisted investments.
The process covers:
- Private equity, sustainable infrastructure, farmland, forestry, traditional real estate, and non-listed credits.
All unlisted assets are managed through external managers. As long-term owners, we influence portfolio companies on climate, biodiversity, and human rights.
Read our expectations on external managers here.
When choosing a new manager or making a new investment
When we invest with a new external manager or in a new investment, we conduct a due diligence. It includes questions about how the manager handles human rights. The purpose is to ensure that the manager shares AP2’s values and respects human rights. Through side agreements, the manager is expected to follow the UN Guiding Principles, the UN Global Compact and – for farmland managers – PRI’s Principles for Responsible Investment in farmland. The manager must also report any controversies to AP2 so that we can follow up on them.
Ongoing monitoring on existing managers
Annual reviews is carried out through questionnaires and dialogue with managers, in order to identify any shortcomings and support changes in processes.
When needed, an analysis of human rights risks in our unlisted assets is conducted, based on sectors and geographical exposure. Managers with high risk and inadequate actions are prioritized for dialogue.
Our unlisted assets are also screened under the process for high-risk countries (described above). We conduct in-depth dialogues with managers operating or investing in countries where AP2 has divested from, to prevent increased risk.
Activities and results are reported in the Fund’s sustainability report.
Responding to Actual Human Rights Breaches
Confirmed negative impacts on human rights are addressed together with the Council on Ethics of the AP Funds (the Council on Ethics), formed by AP1–AP4. The Council on Ethics works for positive change on environment and ethics, especially human rights, through both reactive and proactive measures.
The process covers:
Listed foreign equities and credits, which make up about 41 percent of the Fund’s total portfolio.
Council on Ethics’ due diligence for actual human rights breaches
Screening, analysis and assessment
The Council on Ethics reviews the AP Funds’ holdings twice a year based on violations of international conventions. The Council makes its own assessments, receives support from experts, and uses dialogue to obtain facts.
Dialogues and follow-up
If a human rights breach is suspected, a dialogue with the company is initiated. The goal is to remedy the negative impact, compensate those affected, and prevent recurrence. The dialogue is followed up through defined milestones. If the dialogue does not yield results, exclusion may be recommended – but only after other ways to influence the company have been explored.
Activities and results are reported on the Council on Ethics’ website and in their annual report.
Read more at www.etikradet.se
How we are organised
Day-to-day work on human rights is managed by AP2’s Communications and Sustainability Department, led by the Head of Communications and Sustainability, who is part of the Executive Management Team. Overall responsibility rests with the CEO.
However, the entire organization must understand human rights, particularly within asset management, where the most severe risks exist. This is crucial to fulfilling the Fund’s mandate and achieving the Fund’s goal of embedding human rights throughout all operations.
The management receives regular reports on the Fund’s work with human rights. They decide on strategy, objectives, and geographic exposure in this area. The management also makes decisions on potential divestments due to human rights risks.
The Board receives continuous reporting and decides on the Fund’s Human Rights Policy, exclusions of portfolio companies due to breaches of human rights, and the composition of the strategic portfolio.