Första AP-fonden (AP1) has decided to no longer invest in fossil fuel companies, as the low-carbon transition creates “substantial uncertainty” for such firms and heightens financial risks.
The decision was made in December 2019 by its board of directors, the fund said, but was only widely publicised in mid-March.
Draw a roadmap
Urban Hansson Brusewitz, chairman of AP1, commented: “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.”
The move to divest is a result of the fund’s climate-related financial risk analysis.
It assessed the impact of climate change and the transition to a low-carbon economy on its portfolio.
AP1 expects that evolving regulatory actions, increased taxation and emerging technologies will contribute to a reduction of global carbon emissions.
Over time, fossil fuel companies are also likely to be affected by a shift in demand from households and corporations away from carbon intensive products.
In 2018, the fund, with SEK365.8bn (€33.6bn) of assets under management, decided to no longer invest in companies producing tobacco, nuclear weapons, thermal coal and oil sands.
It will keep promoting investments in sustainable companies that are actively contributing to the transition.
Brusewitz explained that the fund will continue its work as an active owner and responsible investor influencing companies.