Risk Assessment Causes Swedish Pension Fund to Divest from Fossil Fuels

Based on a comprehensive risk analysis one of Sweden’s largest pension funds have decided to divest from fossil fuels. On October 20, 2014, the Second AP Fund announced that it would begin divesting from fossil fuels.

This is but the latest investment fund to divest from fossil fuels in order to mitigate against risks. The Second AP Fund announced that it will divest its holdings in 12 coal and 8 oil-and-gas production companies. This represents a divestment of holdings with a total market value of about SEK 840 million (€91 million or $116 million).

The decision was based on comprehensive risk analysis that included climate impacts. Eva Halvarsson, CEO of the Second AP Fund explained their risk assessment and decision, saying: “Our starting point for this analysis has been to determine the financial risks associated with the energy sector. By not investing in a number of companies, we are reducing our exposure to risk constituted by fossil-fuel based energy. This decision will help to protect the Fund’s long-term return on investment.”

The companies analysis uncovered climate related financial risks associated with thermal coal and tar sands oil. As explained in their analysis: “The Fund believes these companies face serious climate-related financial risks and that it is highly likely that these projects may either be stranded or unprofitable.”

Olivia Linander, Fossil Free Sweden campaign coordinator explained the announcement as follows:

“Today’s announcement shows the writing is on the wall for the fossil fuel industry. The Second AP fund has taken an important first step in recognising that it’s financially irresponsible to invest money that is meant to provide for people’s futures in the very companies fuelling the climate crisis that threatens this future. All AP Funds need to follow their lead now by phasing out investments in fossil fuels and supporting a just transition to a livable future instead.”

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