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AP6

PRI reporting framework 2018

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

New selection options have been added to this indicator. Please review your prefilled responses carefully.

13.1. Indicate if your organisation executes scenario analysis and/or modelling in which the risk profile of future ESG trends at portfolio level is calculated.

13.3. Additional information. [OPTIONAL]


SG 14. Long term investment risks and opportunity

14.1. Describe the process used to identify short, medium and long-term risks and opportunities that could have a material impact on your organisation and its activities.

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 targets further contributes to managing sustainability risk.

14.1 CC. Describe the processes used to determine which climate-related short, medium and long-term risks and opportunities could have a material impact on your organisation and its activities.

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 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.

14.2. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following you act on.

14.2a cc. Please describe how you define “short”, “medium” and “long term”, and describe your material climate-related issues over these time horizons.

Definition
Description of material climate-related issues
Short term
          No current definition of short/medium/long term
        
          
        
Medium term
          No current definition of short/medium/long term
        
          
        
Long term
          No current definition of short/medium/long term
        
          
        

14.3. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

other description

          Integration of climate change in due diligence and monitoring
        

14.4. Indicate which of the following tools you use to manage emissions risks and opportunities

other description

          Engagement with companies and asset managers on climate change related risks and opportunities.
        

14.4a CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Metric Trend
Limitations / Weaknesses
Climate-related targets
          
        
          
        
          
        
          
        
          
        
          
        
Weighted average carbon intensity
          Majority (80% of value of PE portfolio)
        
          Align with TCFD recommendations and provide an additional means of assessing the carbon intensity of the portfolio
        
          tCO2e/MSEK
        
          
        
          N/A Measured for first time for 2017
        
          
        
Carbon footprint (scope 1 and 2)
          Majority (80% of value of PE portfolio)
        
          A means of promoting carbon transparency in PE
        
          tCO2e
        
          Emissions are allocated to the investor based on an investor's ownership of a company, and a corresponding amount of the companies CO2e emissions. This approach is developed for public equity analysis and has in the case been applied to private equity. Reported emissions and estimated emissions from portfolio companies have been used.
        
          Decrease
        
          Acquisitions and exits can have a significant effect on the carbon footprint based on the limited size of the portfolio and the fact that there is no correlation with an index in terms of sector allocation.
        
Portfolio carbon footprint
          Majority (80% of value of PE portfolio)
        
          A means of promoting carbon transparency in PE
        
          tCO2e
        
          Emissions are allocated to the investor based on an investor's ownership of a company, and a corresponding amount of the companies CO2e emissions. This approach is developed for public equity analysis and has in the case been applied to private equity. Reported emissions and estimated emissions from portfolio companies have been used.
        
          Decrease
        
          Acquisitions and exits can have a significant effect on the carbon footprint based on the limited size of the portfolio and the fact that there is no correlation with an index in terms of sector allocation.
        
Total carbon emissions
          Majority (80% of value of PE portfolio)
        
          A means of promoting carbon transparency in PE
        
          tCO2e
        
          Emissions are allocated to the investor based on an investor's ownership of a company, and a corresponding amount of the companies CO2e emissions. This approach is developed for public equity analysis and has in the case been applied to private equity. Reported emissions and estimated emissions from portfolio companies have been used.
        
          Decrease
        
          Acquisitions and exits can have a significant effect on the carbon footprint based on the limited size of the portfolio and the fact that there is no correlation with an index in terms of sector allocation.
        
Carbon intensity
          Majority (80% of value of PE portfolio)
        
          A means of promoting carbon transparency in PE
        
          tCO2e/MSEK (market value) and tCO2e/MSEK (revenue)
        
          Emissions are allocated to the investor based on an investor's ownership of a company, and a corresponding amount of the companies CO2e emissions. This approach is developed for public equity analysis and has in the case been applied to private equity. Reported emissions and estimated emissions from portfolio companies have been used.
        
          Decrease
        
          Acquisitions and exits can have a significant effect on the carbon footprint based on the limited size of the portfolio and the fact that there is no correlation with an index in terms of sector allocation.
        

14.4b CC. Please describe in further detail your key targets.

Target type
Time Frame
Base Year
KPI
Target Methodology
Limitations / Weaknesses
Attachments
          
        
          
        
          
        
          
        
          
        

          
        
          
        
          
        
          
        
          
        

14.5. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

- Carbon footprint

- Weighted average carbon intensity

 

14.6. Additional information [Optional]

14.7 CC. Describe your risk management processes for identifying, assessing, and managing climate-related risks.

Please describe

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.

14.8 CC. Describe your processes for prioritising climate-related risks.

14.9 CC. Do you conduct engagement activity with investee companies to encourage better disclosure and practices around climate-related risks?

Please describe

Since 2015, AP6 carries out an annual climate analysis of the portfolio, including a carbon footprint. The collection of emissions data, provides an excellent opportunity to engage on climate change with investees.

AP6 has further integrated climate change into the ESG due diligence and monitoring of companies and PE firms, which means climate change related issues is a natural part of AP6's interaction with investees. Questions include e.g.

- how climate related risks and opportunities are identified and handled

- governance and responsibility around climate change

- carbon emissions reporting

14.10 CC. Describe how you use data from climate-related disclosures.


SG 15. Allocation of assets to environmental and social themed areas

New selection options have been added to this indicator. Please review your prefilled responses carefully.

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.


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