Swedish pension fund, AP4, has exited holdings in more than 20 coal companies, which it has not named, bringing the carbon footprint of its equities portfolio to nearly half that of its reference benchmark. The fund has also appointed a Head of Alternatives as it gears up to invest more in private equity and illiquid assets.
The SEK357bn (€34.5bn) buffer fund, which made the world’s most ambitious climate commitments for a pension fund back in 2014 when it pledged to ‘decarbonise’ its entire equities portfolio, now has a footprint of around 57% of the MSCI ACWI index, having finalised the sale of the undisclosed firms, which all have thermal coal revenues of 20% or more. AP4 is still considering whether it will publish the exclusion list, it told RI.
Four of Sweden’s ‘buffer’ funds – AP1, AP2, AP3 and AP4 – will be given new investment guidelines by the Swedish Government this year after long-running efforts to reform their mandate. Crucially, from the start of next year, the funds are expected to be able to allocate more to illiquid investments, which many argue will enable them to do more in the sustainable and climate-aligned investment space where infrastructure and long-term investments are essential. The limit on illiquid assets is currently 5%, but this will leap to 40% under the proposed changes.A second proposal, slated to come into practice in the middle of next year, will permit the funds to invest directly into unlisted equities and make direct loans, which could prove another boon from a sustainability perspective. AP4 praised the changes, describing them as “a welcome modernisation of the current investment guidelines that are almost 20 years old by now”. To help it capitalise on the expected freedoms around private equity, AP4 has appointed Jenny Askfelt Ruud as Head of Alternative Investments, beginning this summer. A current Board Member of SEB Investment Management and WoldFavor Sustainability Platform, Askfelt Ruud spent nearly a decade as Head of Sustainability at Ratos, a Swedish private equity house. “Jenny has a long background from unlisted direct investments, long-term ownership and sustainability from inter alia the investment company Ratos, McKinsey and Morgan Stanley,” said Niklas Ekvall, who took over as AP4’s CEO last year. “These are experiences that we seek going forward now that we get an increased and broader investment mandate.” Askfelt Ruud said the new regulation offered a chance for AP4 “to think wide and new”. “Together with the ambition to integrate sustainability, this is an exciting opportunity,” she said, adding: “I hope to contribute with my experience and grow the portfolio of both unlisted and sustainable investments.”
Note: This article was amended to clarify that the carbon footprint of AP4’s equity portfolio is around 57% of the benchmark, rather than 57% lower than the benchmark.