The Sustainable Investment Awards judging panel commended the Swedish pension fund for the actions taken in 2022, including the introduction of the AP4 Alignment Score, a tool for stock selection based on forward-looking data across all sectors with respect to companies' alignment with the Paris Agreement.
AP4 works from a global index and uses quantitative analysis to identify companies that are associated with sustainability risks related to climate change and the environment and reduce the fund's exposure to these risks.
For resource-intensive sectors, AP4 deploys a fundamental stock selection process – a method of determining a stock's real or 'fair' market value including based on climate risk exposure – which it says is complemented by a closer dialogue with the portfolio companies on sustainability matters.
The strategy and the team were initiated in 2021 and are focused on the energy, utilities, and materials sectors. During 2022, fundamental stock selection was implemented in the transportation sector.
AP4 is also working to influence the companies in these sectors toward this transition, through active engagement and by voting at AGMs. In 2022, together with other investors, AP4 took Volkswagen to court in Germany to gain a ruling on minority owners' rights to submit proposals to general meetings, in this case regarding climate lobbying.
In 2023, VW published a climate lobbying and industry association review in response to the case. The regional court’s decision was not to rule in favour of the investor group and the case is now closed
AP4's chief executive officer Niklas Ekvall, commented: "AP4 is honoured to receive the 'Sovereign wealth fund of the year' category at Environmental Finance's Sustainable Investment Awards 2023. Climate change is one of the greatest challenges of our time to society as well as to long-term investors such as AP4. At AP4, we continuously work to develop our climate strategies in order to make investments that contribute to the climate transition as well as to the return of the fund."
Since 2010, the pension fund reports that its listed equity portfolio's carbon dioxide equivalent (CO2e) emissions have decreased by a total of 61%. During 2022, AP4 reported that its portfolio's CO2e emissions decreased by a further 3%.
