Sweden’s SEK365.8bn (€34.5bn) public pension fund, AP1 (Första AP-fonden) has reported its highest annual return in a decade of 15.1% as it marks its first year integrating a new sustainability and climate strategy.
Its sister Swedish AP fund AP4 (Fjärde AP-fonden) also posted strong returns today of 21.7%, during a year when it reduced its carbon footprint to 48% lower than the benchmark index.
The performance figures will be a boost to asset owners implementing long-term sustainability strategies across their investments.
AP1’s strong results for 2019 translate into an average annual real return for the past ten years of 6.9%, exceeding the fund’s target of 4%.
Teresa Isele, acting CEO of AP1, said: “We want our sustainability management to improve our risk-adjusted return, while progressively reducing our portfolio’s carbon footprint to become carbon-neutral by 2050.”
"A global system of relevant pricing of carbon emission would immediately provide impetus"
Last year, AP1 adopted a new sustainability and climate strategy. It includes carbon footprinting and the establishment of a sustainability committee within the board of directors.
Yesterday (Feb 21), AP1 also announced it had appointed as its new CEO, Kristin Magnusson Bernard, former country senior executive in Nordea Markets Sweden, and head of macroeconomic research at Nordea, the Nordic financial services group. She has also held senior roles at the European Central Bank (ECB) and International Monetary Fund (IMF).
It follows the sacking of Johan Magnusson from the role last September over alleged breaches of trading rules.
AP4’s (SEK 418bn – €39.5bn) CEO Niklas Ekvall made a call for a global carbon price as the fund unveiled its strong returns.
In a letter, announcing the 2019 results – a 9.9% average annual return over the last ten years – Ekvall said: “A global system of relevant pricing of carbon emission would immediately provide impetus and momentum to a transition, as all economic actors would have a concordant and uniform incentive to reduce their carbon emissions.”
During 2019, AP4 introduced carbon footprinting for its unlisted real estate portfolio.
For its listed equities portfolio, it added two new resource efficiency measures: water and waste intensity.
AP4 also started measuring direct emissions from companies’ subcontractors in 2019.
AP4 was a founding pension fund member of the Portfolio Decarbonisation Coalition and started investing in low-carbon strategies in 2012 with a goal to achieve zero net emissions of greenhouse gases by 2045.