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AP3

PRI reporting framework 2019

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Those are examples of factors considered in the screening, it does not mean they are all applied all the time.It is important to distinguish and select factors that are relevant and material both for the investee company and for the investor, ie AP3.

Sector screening could be retailers for example, working conditions, toxic emissions, salaries etc.

Corporate governance screening could be board composition,  diversity, treatment of minorities etc.

AP3 as a public entity and part of the Swedish state AP3 does not screen to exclude geographic regions/countries  but we may screen to gain knowledge and insight about potential issues.

Screened by

Description

Those are examples of factors considered in the screening, does not mean they are all applied all the time.It is important to distinguish and select factors that are relevant and material both for the investee company and for the investor, ie AP3.

Enviromental screening  could be energy efficiency, reduced emissions, new technology, etc

Social measures taken to improve working conditions, education, etc

Governance improvement  eg independent  board members, gender diversity,  pay etc

 

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

AP3 screens the portfolio using reliable external data from the MSCI ESG Manager including Carbon Metrics, the Council on Ethics of the AP funds and  Global Engagement Services (GES now Sustainalytics),Trucost, Bloomberg and other sources. It is important to remember to check and /or question the data as it might be wrong or outdated. There is  sometimes a a non negligible difference, changes that the company has done is not yet in the ESG information.

One important objective is to identify and evaluate cases where companies are acting in violation of international treaties and conventions.

Information about companies excluded from the investment universe after board decision is available on the website, and will be updated on a yearly basis. The criteria will vary among different sectors, different degree of relevance and to some extent over time.The screening done can be both negative and positive for a manager of an active mandate i.e.. depending on the portfolio composition and strategy.

In addition to this screening with public exclusion from the investment universe AP3 regularly screen and analyses  the portfolio as part of the  risk management. These screenings can lead to active decisions not to be invested in/have exposure to some companies, the absolute majority of these decisions concern small cap companies.

AP3 is a public entity, all Swedes are "clients" the management and principles arr reported on an annual basis in the Annual Report. if there are bigger changes a press release may be issued. The Finance Department evaluate the AP funds once a year and use then an external party in addition to the Funds own reporting.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

          The service providers AP3 use have the resources to ensure that  data and analysis is reliable and robust. The Council on Ethics also investigate.
        

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.5. Additional information. [Optional]

The robustness and reliability of the information is very important as it is for all information to be used in the investment processes. Part of the integration work should therefore be on the reporting, transparency and standardisation of data. The requirements on company reporting, transparency and standards for comparability is key to good integration.

The updating of the ESG ratings is based on the companies´ annual reporting and other development e.g. incidents that will impact the ESG rating.

In the dialogues kept with many companies and other stakeholders, we get information that can become input in the investment process.


LEI 06. Processes to ensure fund criteria are not breached (Private)


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