AP2 divests 19 more fossil fuel companies over stranded assets fears

Removal from portfolios adds to 20 other O&G stocks taken out in 2015.

Andra AP-fonden (AP2), the SEK300.6bn (€32.4bn) Swedish buffer pension fund has divested from a further 11 coal and eight oil and gas companies with a total market value of about SEK 550m (€59m) in what it says is a reduction of financial risks due to the potential of “stranded assets” within the fossil fuel sector.
After having carried out a first risk analysis from a climate perspective in 2014, at the time AP2 divested 20 fossil fuel companies. The latest ejection is the result of further last analysis from December 2015. In total, the fund has divested now from 23 coal companies and 15 oil and gas companies. One oil and gas company was reintroduced into the fund’s benchmark index. The divested companies have not been named. The Swedish fund said a number of the oil and gas companies removed from its portfolio have a large financial exposure to high-cost projects, such as the extraction of tar sands. AP2 estimates that they are running high probability risks that the projects will either become “stranded” or unprofitable.Eva Halvarsson, CEO at AP2 said the fund’s starting point in assessing the financial impact of climate risks on portfolio companies, was to determine whether they had been factored into the market price: “Both our analysis of fossil-energy companies and our assessment of the energy sector at the close of last year have been conducted in strict adherence to the fund’s stated mission, namely: to take ethical and environmental concerns into account, without abandoning the broad goal of a maximum return on assets. This is why these analyses adopt a financial perspective. Disinvestment from these companies serves to protect the fund’s long-term return on invested assets.” The fund has already sold the holdings and the freed capital from the divestments was reinvested across all sectors. In April, AP2 announced that it would allocate one percent of its total strategic portfolio to green bonds in a move that sees it re-define green bonds as a separate asset class. Link