AP2 is one of five funds that act as a buffer in Sweden's national pension system. The Pension System was created in 1960, but it was not until 2001 that the current AP fund structure was established, allowing the AP funds to diversify their strategies. One of the key investment rules, set out by the Ministry of Finance, is to consider environmental and ethical matters without compromising the objective of attaining high returns. As of December 31 2019, AP2 had SEK 381.3 billion of assets under management (US$ 40 billion).
AP2's sustainability strategy seeks to integrate sustainability in all investment processes, actively seek investments that contribute to sustainable development, use dialogue as a tool, and seek to be a leader within sustainability. The fund's key focus areas are Climate, Corporate Governance, Diversity, and Human Rights. AP2 is invested in almost all asset classes. Particularly, AP2 allocates 3% of its assets to a Green Bond dedicated portfolio which is aligned to the UN Sustainable Development Goals.
IPE: The sustainable debt market broke several records last year, reaching $1.17trn (€1.03trn) by the end of December, according to BloombergNEF. Issuance during 2019 was $465bn globally, up 78% on the previous year. It was the highest volume ever recorded.
IPE: Born of a reverse enquiry from Swedish pension plans more than 10 years ago, green bonds are now a well-established asset class, accounting for a growing share of global fixed-income issuance and increasingly diverse in terms of issuers.
IPE: Sustainability is reshaping the ecosystem of capital markets and the behaviours of their participants. But that journey will be evolutionary. It requires mindset shifts as much as physical changes from the way investing has been done historically. Early progress, however, augers well for the future in spite of formidable obstacles.
Top 1000 Funds: Chief investment officer of the world’s largest pension fund the $1.5 trillion GPIF, Hiro Mizuno, says large institutional investors must stay calm and maintain their long term investment course.
Bloomberg: The drive toward sustainable investing has shifted in response to the coronavirus, which has spread to 170 countries. ESG investors haven’t quit caring about limiting fossil fuels, cultivating diverse workforces and reducing the use of plastics, and they’ve always taken an interest in worker welfare.
Financial Post: For European governments battling to brace economies pummelled by the coronavirus, there might be no better time to go green. Normally thrifty countries, such as Germany, accept they will have to spend heavily to weather the economic shock of the coronavirus. Many also face the challenge of plowing billions of euros into climate schemes to keep carbon reduction pledges.
Markets Media: Total assets invested in environmental, social, and governance exchange-trade funds listed globally reached a record at the end of last month.
European Pensions: The Parliamentary Contributory Pension Fund (PCPF) has announced that it is reducing its investment in fossil fuels and increasing its exposure to renewable energy.
Financial Times: Banks, insurers and asset managers face a growing threat from climate change, as the physical effects of global warming and the transition to a low-carbon economy pose unprecedented risks to the status quo. [Full article available to Financial Times subscribers.]
The Tara Health Foundation was established in 2014 by Dr. Ruth Shaber, the founder of Women’s Health Research Institute in Kaiser Permanente’s Northern California region. The Foundation's main areas of focus are U.S. Reproductive and Maternal Health, Equitable Workplaces, and Gender Lens Impact Investing. As of December 31st 2017, the Foundation had over US$ 83 million of assets under management.
The Tara Health Foundation has committed 100% of its capital to further its mission. As such, it invests solely in thematic funds focusing on Gender and Women issues. Furthermore, it provides grants to organizations researching how to invest for impact in U.S. Reproductive & Maternal Health, Equitable Workplaces, and Gender Issues.
Opalesque: More than one-third of global alternatives investors have refrained from investing in a fund because it had an inadequate ESG policy; 26% said this occurs "sometimes" and 9% said it happens "frequently."
Top 1000 Funds: The climate crisis is fundamentally a risk management failure Bob Litterman, co-founder of the Black Litterman Model, told the US Senate Democrats’ Special Committee on the Climate Crisis last week.
BNN Bloomberg: Being a capitalist with a conscience sometimes means putting people over profits, both for their benefit and that of the company in the long run. The Covid-19 pandemic has made this plain.
Yahoo! Finance: Corporate proxy season is already underway, with companies filing annual statements ahead of thousands of planned general meetings stretching from April to July. Most firms are required by law to hold gatherings to approve corporate policies.
The Asset: The European Union Technical Expert Group (TEG) on Sustainable Finance recently published its report on a Usability Guide for the EU Green Bond Standard (EU GBS), taking another step forward towards establishing a Green Bond label.
MarketWatch: Fund giant BlackRock has released its stewardship playbook, a rough plan that furthers the industry-rattling pledge for sustainability from its leader Larry Fink earlier this year.
Bloomberg: When shares of Brazil’s Vale SA suddenly crashed last year after a deadly dam collapse, Nick Price did what any fund manager might have done for a stock he already owned: He purchased more.
GreenBiz: As investors prepare for the 2020 proxy voting season and try to assess the prospects for climate-related shareholder proposals (and decide how to vote), looking at data from last year’s proxy votes by asset managers can help.
IPE: Swedish national pension fund AP1 has become the first pension fund in Sweden to announce it is divesting all fossil fuel companies, citing the financial risks involved in such investments given the ongoing international transition to a low-carbon economy.
Established in 1921, the San Francisco Employees' Retirement System ("SFERS") administers two employee benefit programs for eligible San Francisco city and county employees. As of June 30, 2018, SFERS managed $24.3 billion of assets on behalf of 73,000 individuals.
In 2018, following pressure from board members, SFERS committed 5% of its assets to low carbon and ESG dedicated strategies, as well as progressively divesting from firms which presented high ESG risks. Furthermore, in 2019, they implemented a framework to manage the carbon risk in their portfolios which rests on 4 pillars: Invest in strategies aligned with the transition, Engage with companies and external managers, Divest companies with unmitigated ESG risks and Advocate policy for a sustainable financial system. Finally, SFERS announced last week a new Climate Action Plan to achieve net-zero emissions by 2050.
IPE: A consultation has been launched on draft non-statutory guidance for occupational pension scheme trustees on assessing, managing and reporting climate-related risks.
Bloomberg: Goldman Sachs Group Inc.’s fund-management unit wants a woman on every corporate board, and the Wall Street firm said it’s now willing to vote that way across the globe.
BNN Bloomberg: If things continue like the past few weeks, it may be a little tough to prove the case for ESG investing based on stock market returns this year. So that shifts the emphasis to the question of whether ESG investors are producing real world outcomes. What kind of report card will scientists, rather than Wall Street, give them?
Bloomberg: Are we trying to protect the climate with finance, or protect finance from a changing climate? It’s a question that gets discussed surprisingly rarely considering how important climate change is becoming to finance and vice versa.
IPE: Half of 75 of the world’s largest asset managers “fail to account for their real-world impacts across their mainstream assets,” ShareAction has said on the basis of a new analysis of their approaches to responsible investment.
All About Alpha: Unicorns (privately owned start-ups with a valuation of at least $1 billion) have long been the great sought-after beasts of the VC and PE worlds. But are they good for the planet?
The Asset: There are currently several important disruptive trends in the asset management ecosystem. Some of them, such as pressure on fees, are clearly linked to the atypical current macro-economic environment with “lower for longer” interest rates. Some are linked to longer term trends unfolding methodically and paving a new path for the industry, such as demographics, technology and climate change. Because of their long-term nature, those trends are often disregarded until they become “today’s reality”.
The Wall Street Journal: Individual investors have moved billions of dollars into funds that prioritize issues like sustainability and diversity, and activists are hoping to tap into that cash.
Citywire: The Securities and Exchange Commission (SEC) is considering making amendments to its rules on how funds are named amid challenges posed by the emergence of index strategies, ESG and managers’ use of derivatives.
PensionDanmark was established by labour unions in Denmark to provide pension benefits to all blue collar workers. Today, it is one of the largest pension funds in Europe with €32 billion of assets under management as at December 31, 2018.
The pension fund employs strict screening criteria on human rights, the environment, climate factors, corruption and corporate governance, in addition to international norms by the ILO and the UN. In its public equity portfolio, PensionDanmark leverages corporate engagements and proxy voting at portfolio companies to improve their ESG performance. Furthermore, the pension fund is directly invested in renewable energy infrastructure, producing 3,665 GWh of green energy per year. Finally, the pension fund reported its own ESG performance using a methodology developed by the CFA Society Denmark (Finansforeningen), the trade organization of Danish Auditors (FSR) and Nasdaq Copenhagen – a first in Denmark for a pension fund.
Pensions & Investments: Brown University sold 90% of its investments in companies that extract fossil fuels and is liquidating the remainder, President Christina H. Paxson said in a letter to the campus community Wednesday.
IPE: Three of the largest pension funds in the world – the UK’s Universities Superannuation Scheme (USS), the Government Pension Investment Fund (GPIF) in Japan and the California State Teachers’ Retirement System (CalSTRS) in the US – have joined forces to push for a long-term investment approach in a bid to create value.
Financial Times: ESG ratings are becoming embedded in financial markets. A growing number of investment indices now hinge on companies’ rankings for environmental, social and governance criteria, and some banks are even offering better borrowing terms to companies with strong ESG scores. [Full article available to Financial Times' subscribers.]
Top 1000 Funds: Being passively invested shouldn’t mean being passive with regard to responsibilities says the Church of England Pension Board which has developed a new climate transition index with FTSE Russell, LSE and TPI that is the first to incorporate forward-looking climate data.
Funds Europe: A “meaningful” relationship exists between ESG scores and developed markets sovereign spreads. This correlation appears to be stronger in developed markets than emerging markets, although there is a significant correlation between ESG factors and sovereign default swaps in both.
IPE: Short of flying someone to Mexico City to knock on the door of the mining and transport company’s headquarters, the Danish pension fund had done all it could. Selling off its DKK13m (€1.7m) block of shares in Grupo México was not what ATP really wanted to do at the end of last year.
IPE: The Net-Zero Asset Owner Alliance is an international group of institutional investors who have committed to transition their investment portfolios to net-zero greenhouse gas emissions by 2050. This pledge, explains Günther Thallinger, chair of the steering group, is consistent with a maximum temperature rise of 1.5°C above pre-industrial levels.
Barron's: More women are working in alternative investments, including private equity and venture capital, but their progress has only inched forward.
Financial Times: Nearly one in five FTSE 350 companies have been cautioned over a lack of women on their board and executive committees, as big investors increasingly demand that businesses pay more heed to diversity. [Full article available to Financial Times subscribers.]
Established under its current form in 1998 following the merger of Pension Sampo and Pension Varma, the private insurance firm is one of the biggest private investors in Finland. As at December 31 2018, Varma had €44 billion of assets under management.
In 2015, Varma became the first Finnish pension fund to set a goal of carbon neutrality for its portfolios by 2035. Its Climate strategy includes setting stricter exclusionary screens for its listed equity and corporate bond portfolios related to Coal and Oil exploration, and increasing exposure to low-carbon firms across all asset classes (listed and private equity, index funds, corporate bonds and real estate) to align its portfolios with a 1.75 degree world.
Top 1000 Funds: Only 16 of the 74 largest public pension plans in the US ($4.5 trillion in AUM) mention ESG or responsible investing in their public documents. Only two out of 74 mention the Sustainable Development Goals of the United Nations.
Robeco: Metal producers remain vital for the transition to the low-carbon economy, supplying the raw materials for electric vehicles among other products, while the world will be reliant on fossil fuels for many years to come.
Institutional Asset Manager: Australia’s mutual fund assets in sustainable investments surged 23.0 per cent year-on-year (y-o-y) to AUD66.8 billion (USD46.7 billion) in 2019, and gathered AUD1.2 billion in inflows over the same period.
Citywire Selector: European green bonds have grown considerably in recent years but continued scepticism and limited oversight regarding labels could be limiting its true potential.
Financial Times: Asia is the dynamo of today’s global economy. But it lags behind the west in one critically-important regard: commitment to environmentally and socially sustainable investment. [Full article available to Financial Times subscribers.]
Funds Europe: A number of UK pension schemes say they struggle to report on their ESG policies to a high standard and are largely unfamiliar with risks associated with climate change.
Financial Times: Barely a day goes by without another large company announcing a sustainability drive, encompassing everything from encouraging employees to use less plastic to withdrawing billions in funding from fossil fuel groups. [Full article available to Financial Times subscribers.]
Institutional Investor: Yale University chief investment officer David Swensen on Thursday reiterated his opposition to divesting the school’s $30.3 billion endowment of fossil fuels.