AP6 carries out an annual risk assessment, where each risk and its risk driver are analysed. The likelihood of materialisation of each risk, as well as the impact of such is discussed together with an assessment of mitigating factors. Finally the level of net risk is assessed and confirmed. Management reports the result of the risk assessment to the audit committee, and in relevant cases to the sustainability committee, of AP6’s board of directors.
Specifically regarding sustainability risks, these are primarily related to the investment portfolio and can entail a number of risks depending on e.g. sector and geography, including the risk of breaches of international norms on human rights, labour rights or anti-corruption, risk for environmental degradation or climate change risk. AP6 manages sustainability risk in the portfolio, based on AP6's Code of Conduct and ownership policy, through systematic diligence and monitoring of investments from a sustainability perspective. The annual adoption (by the board of directors) of specific sustainability goals further contributes to managing sustainability risk.
Since 2015, AP6 carries out an annual climate analysis of the portfolio, including a carbon footprint. Another feature of the climate analysis has been an in-depth analysis of how companies and private equity funds are managing the issue of climate change in their activities and investments. The conclusion of the analysis is on the one hand that AP6 portfolio is not carbon intensive, mainly due to sector focus, and on the other hand that there is a need for raising awareness about climate related risks and increasing climate transparency at individual investees. The annual climate analysis is presented to the board of directors, which annually sets sustainability targets for AP6, including targets relating to climate change. Medium and long-term climate risk is mainly mitigated through awareness building and through promoting climate transparency.
AP6 has further integrated climate change into the ESG due diligence and monitoring of companies and PE firms as a means of detecting climate related investment risk. As a result some investments (mostly energy related) have been rejected based on climate change related considerations. Additionally, AP6 looks positively at companies that can provide products and services in a low-carbon economy, and companies with an ambitious approach to energy efficiency.