The incorporation strategies must be realistic, relevant and material for the mandate/strategy in question. The overall screening applies to the total portfolio. As the portfolio during 2018 had circa 3000 holdings there is a need to have an efficient process that makes the ESG integration more manageable. The relevance and materiality of different ESG factors vary among different industries, geographies and also over time. Both portfolios and also the bench mark index are screened and narrowed down to make analysis of material issues doable.
Each active manager is responsible for analyzing the stocks in their portfolio, with respect to sustainability risks/opportunities and be prepared to explain the positions. Again the relevance and materiality will differ for different mandates, different strategies and different investment horizons.
In the GES/Sustainalytics screen, on behalf of the Council on Ethics, all the AP-funds listed equities portfolios are screened twice a year and the result is analysed by each fund.
In addition to this the portfolio or part of it (different mandates) will be screened on a regular basis by AP3 internally; (before AG Sustainability meetings (ca 1/month), in connection with the rebalancing of the customized indices, quarterly, in connection with the annually internal 360 ESG/Sustainability review (in the internal screening MSCI ESG Manager plus outcome from third party is used). At each occasion the outcome is shared and discussed with the portfolio managers. In addition there is an ongoing discussion about many different sustainability issues; e.g... governance issues, board composition, gender, CO2 emissions and other climate issues, human rights, labour rights, work place incidents etc. The CO2 emissions are measured and analysed end of each year by Trucost. The outcome of this is also integrated in the overall ESG management of the portfolio.
AP3 has a holistic on sustainability, as one of many factors that should be considered in the portfolio construction and investment decisions. To AP3 the sustainability perspective is an integral part of all portfolio managers’ mandates and responsibilities. It is an integral part of the creation of long term value and AP3s mission. The sustainability strategy covers the entire portfolio and requires all portfolio managers to consider ESG aspects in their investment decisions, both when making long-term strategic allocations and individual investments. The strategy chosen must offer long-term cost-efficiency and is therefore adapted to investment holdings and exposure. AP3 works actively to limit portfolio-related risk and to promote long-term sustainability through effective stewardship and investments.
In the Advisory Group on Sustainability portfolio managers (from different asset classes) , the Sustainability Team, Head of Portfolio Strategy, CIO, discuss and decide on measures to be taken. These are based on sustainability related information, information on controversies, screening results etc, input in the process is coming both from staff responsible for sustainability and the portfolio managers. The financial, primary, and/or reputation impact govern the decisions.