28 November, 2018

Climate

 

The main purpose of AP6’s focus on climate issues is to demonstrate its importance from an investor perspective and strive for more transparency.
AP6 supports the newly launched recommendations on how companies and investors can report climate-related information. For more information, see the Task Force on Climate-related Financial Disclosures (www.fsb-tcfd.org).

Climate aspect – an integral part of the investment process

  • AP6’s Board of Directors has established goals for AP6’s climate efforts.
  • The AP6 Code of Conduct states that, “AP6 shall actively strive to ensure that the companies and funds in which AP6 has invested, identify and take action on climate-related risks and opportunities”.
  • AP6 has also integrated climate issues into its assessment of new investments and it reviews the climate-related risks and opportunities that could impact the investment decision or plan for ownership.
  • Questions about the climate-related risks and opportunities are included in the template for the annual sustainability assessment of fund managers in AP6’s portfolio.
  • AP6 strives to demonstrate the importance of climate issues from an investor perspective. It also strives for more transparency in reporting of environmental impact.

Carbon Footprint – for more transparency

  • From AP6’s perspective, measuring carbon footprint is a way of demanding more transparency from unlisted companies and PE funds. It is also a way of increasing awareness of climate issues in the VC industry on a broader perspective.
  • Compared to listed companies, it is not as common for unlisted companies to report their carbon emissions. To a certain extent, it is due to a lower level of public reporting. Furthermore, unlisted companies face different sets of requirements (from their owners, consumers, interest groups and other stakeholders) when it comes to measuring and reporting carbon emissions. Because it is relatively unusual for unlisted companies to report their carbon emissions, access to such information is limited.
  • In order to report the carbon footprint of AP6’s unlisted portfolio, the information reported on portfolio companies’ carbon dioxide emissions has been combined with estimated carbon dioxide emissions.
  • For an investor in unlisted companies with a limited number of investments, there can be large variations between the divestment of a company in one sector, and the acquisition of another company, in a different sector. Carbon footprint thus becomes a rather blunt tool for measuring, for example, an unlisted portfolio’s climate impact over time. Besides that, carbon footprint does not capture climate-related physical risks, such as droughts and floods.
  • A carbon footprint measurement for AP6’s unlisted portfolio is taken each year using the latest available carbon dioxide data, all in accordance with what has been agreed between the other Swedish AP Funds.

Fossil fuels

  • AP6 has very few investments in the energy sector (as of 2017-12-31, 2.1% of its managed assets). Of that, most is the sector for services to the extractive industry. Accordingly, AP6 has relatively little direct exposure to the extraction and distribution of fossil fuels.
  • On the whole, AP6 is against making investments in fossil fuels and there have been times when it has turned down investments associated with them. The reason for this is the negative climate impact of fossil fuels and the risk of ending up with stranded assets. This occurs because the growing risks of climate change may render fossil fuels unusable (e.g. due to global carbon budgets). Besides these, there are also other financial risks.