Sweden’s AP1 fund has announced that it will no longer invest in fossil fuels as it targets a carbon neutral portfolio by 2050.

It said the decision is due to the fund’s work to identify and analyse climate-related financial risks in the economy, and in the fund’s investment portfolio.

Evolving regulatory actions, increased taxation and emerging new technologies are expected to contribute to a reduction of global carbon emissions. In addition, a shift in demand from households and corporations away from carbon intensive products may also increase over time, it said.

Therefore, the fund concluded that the transition towards a low-carbon economy, less dependent on fossil fuels, represents a substantial uncertainty for companies involved in coal, oil and natural gas activities, and continued investments related to these activities can increase the financial risk exposure of the fund.

Commenting, AP1 chairman Urban Hansson Brusewitz, said: “Our assignment is to manage the fund’s assets in an exemplary way through responsible investments and achieve high returns for the long term, while supporting sustainable developments without compromising the fund’s targeted investment returns.

“An integral part of this ambition is to manage our climate-related financial risk exposure and align it with the overall risk level of the fund. Divesting from fossil fuels is an efficient way for the fund to manage the financial risk associated with a transition in line with the Paris agreement. Further, we have decided to develop a roadmap and measurable targets towards reaching a carbon neutral portfolio by 2050.”

AP1 said it has been working on identifying and assessing the impact of climate change, and the transition to a low-carbon economy, on the fund’s investment portfolio. It noted that a transition in line with the Paris agreement is expected to result in comprehensive measures to support a shift to an economy less dependent on fossil fuels.

As a result, managing the fund’s exposure to climate-related risks has been a prioritised focus area for some time, and has resulted in a steady reduction of the risk exposure. At the end of 2018, a decision was taken to no longer invest in companies involved in thermal coal and oil sands.

It said the board of directors’ decision in December 2019, to divest from all fossil fuels, is a natural step in aligning the climate-related financial risk to the overall risk level of the fund. In parallel, the fund will promote investments in companies that are actively contributing to the transition and will be part of a profitable and sustainable economy over the long-term.

“We will of course continue our important work as an active owner influencing companies. As a responsible investor, an important contribution in the climate issue is to make clear requirements on portfolio companies and our investment managers to accelerate their agenda for managing the climate risk exposure,” Hansson Brusewitz concluded.

Share Story: