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Sweden’s AP1 to re-tender $4.5bn emerging markets mandates with ESG at the core

Pension fund ‘simply wouldn’t consider’ managers without sustainability

Swedish public pension fund Första AP-fonden (AP1) is re-tendering a huge chunk of its emerging markets’ portfolio, saying that if asset managers don’t include ESG considerations then “they won’t pass first base”.

This summer, RI reported that the SEK388bn fund had selected BlackRock to run an innovative EM mandate, which sought to overcome the difficulties around ESG in passive allocations.

Now, AP1 has confirmed that it is planning to re-allocate seven large-cap equities EM mandates, and is currently in discussions with a view to concluding the tender process during the first quarter of next year. The total value of the assets up for grabs is around $4.5bn.

“We are at the stage where we need to re-tender the whole EM portfolio, just as a matter of course,” explained Mikael Angberg, Chief Investment Officer at AP1.“In that process, if an emerging markets equities manager submits an RFP response with no mention of ESG, then they won’t pass first base – we simply wouldn’t consider them.”

“We’re open to different approaches to sustainability, but if there isn’t a focus then they won’t make it through to the first round.”

“We’re open to different approaches to sustainability”

Most of AP1’s assets are run in-house, but the fund outsources its emerging markets portfolios to specialists. It has 13 mandates altogether, with around half in passive and half in active.

The move comes as Sweden’s parliament today votes on changes to the AP funds’ rules, requiring them – among other things – to ensure they are leaders on sustainability.