The Fjärde AP-Fonden, or AP4, is one of the six state-owned pension funds in Sweden. Sweden’s pension system has two tiers: five buffer funds and a premium pension system. The five buffer funds (AP1-4 and AP6) work on a pay-as-you-go system in which current pension contributions pay current income pension benefits. These buffer funds should provide spare capital for when state pension funds payments exceed tax revenues, when an ageing population increases demands on the pension system. At the end of 2018, it held SEK349.3 billion in assets under management.[1]
AP4 works together with AP1, 2 and 3 with the Council on Ethics on environmental and ethical issues. The Council on Ethics makes recommendations for companies to be excluded from the investment universe of the AP funds. The Council recommendations are based on international conventions that Sweden has signed, including the Non-Proliferation Treaty.[2]
On 1 January 2019, new legislation took effect that raises the sustainability standard for the funds. It requires the AP funds to “manage their assets in an exemplary way through responsible investments and responsible ownership”. Whereas the Ethical Council interprets the NPT to legitimize investments in nuclear weapons producers from NPT countries, “AP4 is of the view that an exemplary interpretation of the Non-Proliferation Treaty supports the decision not to invest in companies involved in nuclear weapons. AP4 assesses that the current upgrades and modernizations of nuclear weapon systems are not aligned with the intention of long-term disarmament as expressed in the Non-Proliferation Treaty.”[3]
The exclusion policy applies to all assets managed by AP4. External asset managers are also required to comply with the policy.[4]
The Ethical Council has a public list of companies recommendationed for exclusion which is followed by the fund. As of January 2019 this list includes the following companies for involvement in prohibited weapons: Hanwha; Larsen&Toubro and Poongsan.[5] However, AP4 uses a more comprehensive exclusion list internally.[6]
We congratulate AP4 for expanding the scope of their policy to cover all nuclear weapon producers and look forward to their comprehensive implementation of the policy. We recommend that AP4 divest from the nuclear weapon producing companies in which it holds shares and bonds.
Website: http://ap4.se/sv/
Linked-In: https://www.linkedin.com/company/fj-rde-ap-fonden/
[1] AP2 “A unique pension systems”, AP2 website (https://www.ap2.se/en/about-ap2/our-mission/a-unique-pension-system/), viewed 9 July 2019; AP4, “PRI Reporting Framework 2019”, UNPRI website (https://reporting.unpri.org/surveys/PRI-reporting-framework-2019/F371B399-4784-4684-AB94-F1724ED8FC81/79894dbc337a40828d895f9402aa63de/html/2/?lang=en&a=1), viewed 25 September 2019.
[2] Etikradet, “Kärnvapen”, Etikradet website (http://etikradet.se/etikradets-arbete/positioner/karnvapen/), viewed 9 September 2019.
[3] AP4, “AP4 increases sustainability ambitions – divests from nuclear weapons and sand oil”, 16 January 2019, AP4 website (https://web.archive.org/web/20190421112107/https://www.ap4.se/en/2019/1/ap4-increases-sustainability-ambitions–divests-from-nuclear-weapons-and-oil-sand), viewed 10 July 2019..
[4] AP1-4, written response to PAX dated 18 May 2015.
[5] Council on Ethics, “Companies that have been recommended for exclusion”, 2019, Council on Ethics website (http://etikradet.se/etikradets-arbete/reaktiva-dialoger-vid-krankning/rekommenderade-uteslutningar/?lang=en), viewed 10 July 2019.
[6] AP4, “Excluded companies”, AP4 website (https://www.ap4.se/en/esg/excluded-companies/), 10 July 2019; AP4, written response to PAX dated 29 August 2019.