28 November, 2018

ESG Fund Investments

 

Annual evaluation since 2014

  • AP6 uses its own template for sustainability assessment and monitoring of PE funds.
  • The assessment is carried out each year on most of the fund managers in AP6’s fund portfolio.
  • Structured interviews are held to collect information. They are based on the PRI Limited Partners Responsible Investment Due Diligence Questionnaire, which are sustainability aspects compiled by investors
  • AP6 uses its own ESG scorecard for the assessment
  • Structured feedback is then given to the fund managers who have been assessed
  • The average for the AP6 portfolio is estimated to be higher than the average for a global private equity portfolio. There are primarily two reasons for this. The first has to do with the fact that AP6’s portfolio primarily consists of funds managed by large Nordic and European investment teams. AP6 has concluded that they have more highly developed efforts in making responsible investments compared to other funds in the global market. The other reason is that AP6 has successfully integrated ESG assessment into the fund selection process. In addition to the requirement of long-term high returns, there must also be established ESG efforts and/or a high level of ambition for doing so.

ESG stands for Environmental, Social and Governance factors.

 

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ESG assessment of funds 2018

In 2018, AP6 met with 22 fund managers as part of the annual ESG assessment of the fund portfolio. AP6 uses its own model for this, which is aligned with an industry-specific template for sustainability evaluation of fund managers in the unlisted investment asset category.
The average score in the fund portfolio increased in 2018 compared to 2017 largely because many funds improved their score in one or more areas. The overall assessment is that all funds strive to actively address sustainability and many have made significant progress.
Like last year, funds with formalized ESG processes and a high level of ESG expertise received the highest scores. The evaluation also revealed that many funds have increased the focus on climate and gender. Both these areas are focus areas in AP6‘s sustainability approach and are inte-grated into the annual ESG follow-up with fund managers, but scores are not currently awarded in these areas. Although there is a positive correlation between the size of a fund (and thus its resources) and the score received, some smaller funds received high scores thanks to their structured, efficient ESG processes.
For each fund, detailed feedback is provided in separate meetings. The feed-back includes both open discussions and possible areas for improvement.

 

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 Read the AP6 Sustainability Report.