Swedish fund confronts “difficult” ESG reporting issue

The Swedish national pension fund AP7 has appointed KBI Global Investors (KBIGI) to an environmental-related equity mandate and is taking on the “notoriously difficult” task of how impact investing is measured.

The pension fund, which has 460 billion Swedish krona (€45 billion) of assets, has invested €75 million in the KBIGI Water Strategy, which is part of the Ireland-based asset manager’s newly launched green impact equity mandate. 

AP7’s said water-related investment was priority for the fund’s commitment to the United Nations Sustainable Development Goals (SDGs).

These are a set of 17 goals and sub targets for the eradication of poverty and hunger, the protection of the environment, the provision of clean water and sanitation, and global prosperity. SDG 16 deals with clean water and sanitation.

But an additional aim of the Swedish pension provider is to develop methods for measuring the sustainability impact of investments and it is working with asset managers towards this.

Mentioning that the fund used money divested from companies blacklisted over climate “misalignment” and put the money instead towards impact investing and environmental, social and governance (ESG) strategies, Johan Florén, head of ESG for AP7, said: “A key aspect of the mandate is the creation of bespoke metrics to measure the sustainability impact of investments – something that is notoriously difficult to do.

“Lots of investors and asset managers are looking to address this challenge right now and trying to come up with solutions; we don’t expect to solve it, but we want to be a part of the process.”

In March, KBIGI launched an SDG impact measurement tool, which awards a positive, neutral or negative impact score based on the percentage of an investment portfolios’ revenue that is aligned with the SDGs.

KBIGI, which is majority owned by France’s Amundi and has €10.1 billion of assets under management, has circa €800 million in water assets including €190 million in a Ucits fund.

Geoff Blake, head of business development and client services at KBIGI, said the appointment demonstrated the “successful collaborative nature of working with local Amundi offices to profile KBIGI’s products and strategies”.

He said impact investing and ESG were “an area of increasing demand within the institutional and wholesale space, with growing numbers of investors looking to achieve impact through public equities”.

©2018 funds europe

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