Staffan Hansén: aligning AP3’s portfolio to net zero
AP3’s CEO explains how the Swedish pension fund is tackling the challenge of decarbonising its portfolio
In March, the third Swedish national pension fund AP3 launched its new Climate Plan, which outlined its roadmap for achieving net zero emissions in its portfolio by 2050 and for being Paris aligned at 1.5 degrees.
At the Reuters Impact 2023 conference in London, Staffan Hansén, AP3’s chief executive officer, detailed how the $45bn pension fund is putting the climate transition into practice.
Like many institutional investors, AP3's exposure to carbon assets is heavily concentrated in a limited number of stocks. The fund is invested in roughly 1300 companies across the globe, however only 55 of these companies account for “approximately 70%” of the pension fund portfolio’s carbon emissions, Hansén explained.
“So, we have a pretty well-defined target, which is to pursue these companies [55 high emitting companies] to adopt plans and climate targets in order to be aligned with the Paris Agreement before 2040.
“These climate targets and plans should board approved, they should be science-based, they should be backed up by investment plans and should preferably be supported by climate targets,” Hansén told delegates in a fireside chat.
Hansén explained that AP3 also checks whether individual corporate decarbonisation strategies are realistic: “as we need to be confident that they [companies] can execute these plans and that they are aligned with the Paris Agreement of 1.5-degrees”.
AP3 uses an “implied temperature rise” metric, which assesses how aligned the climate plan is with the 1.5 degree target. According to this metric, AP3’s portfolio level is currently 2.2 degrees, “so, essentially we have a lot of work still to do”, Hansén stated.
The work of the Transition Plan Taskforce is a really important building block in ensuring that private finance is also aligned with our [the UK government’s] net zero ambitions.
'Financing the transition needs to come from private sector'
In conversation with Hansén, Baroness Joanna Penn, Lords treasury minister and co-chair, HM Treasury and Transition Plan Taskforce (TPT), stated that she is “conscious that financing the transition is not going to come from the government, it needs to come from the private sector”.
“And that's why, at COP26, we announced our intention for the UK to become a net zero aligned financial centre, basically ensuring that the flows of private finance aligned with the Paris targets.
“We also made a commitment at COP26 to move towards transition plan disclosure being mandatory in the UK,” she added.
Speaking to delegates, Penn explained that as part of the TPT’s work to influence the flow of private finance into the UK, the taskforce has developed a framework that allows firms to disclose their net zero transition plans.
“This framework also allows the users of these transition plans to really understand whether it's sufficiently ambitious, whether it is Paris aligned and whether it has enough focus on action.
“The work of the TPT, I think it's a really important building block in ensuring that private finance is also aligned with our [the UK government’s] net zero ambitions,” she added.
