Swedish State Pension Fund to Cut Fossil Fuel Companies

Sweden’s second pension buffer fund, AP2, is to cut 20 coal and oil companies from its portfolio in a bid to reduce “financial risk” linked to climate change.

The SEK 264.7 billion ($36.7 billion, €28.8 billion) fund is cutting 12 coal companies and eight oil and gas production firms, with a total market value of SEK 840 million, or roughly 0.3% of the portfolio.

“Our starting point for this analysis has been to determine the financial risks associated with the energy sector,” said Eva Halvarsson, CEO of AP2. “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.”

In a statement released today, AP2 said its team had reviewed all holdings in fossil fuel companies and assessed the financial risk posed to each one by climate change.

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The fund said the coal companies it would sell “face considerable climate-related financial risk, due to the negative environmental and health impacts of coal”. AP2 also cited competition from gas and renewable energy sources as affecting demand for coal.

AP2 also identified “serious climate-related financial risks” for a number of oil producers, particularly involving “high-cost projects” such as extracting oil from oil sands. AP2 said it believed it was “highly likely that these projects may either be stranded or unprofitable”.

The Swedish fund is the latest institutional investor to reduce or completely scrap their investments in fossil fuel producers. Stanford University’s $18.7 billion endowment said in May that it would sell out of fossil fuel-related companies, while the $860 million Rockefeller Brothers fund in September announced its intention to divest from coal and oil. A group of US charities representing $1.8 billion in assets also took similar steps at the start of this year.

Yale University’s $20.8 billion endowment has forged a different path, encouraging its asset managers to “anticipate possible future regulatory actions in response to the externalities produced by the combustion of fossil fuels”—more in line with AP2’s analysis-led approach.

AP2’s CIO Hans Fahlin is #83 in the year’s Power 100 list.

EdHetherington_ChrisBuzelli Ed Hetherington, Managing Director, UNCMC (Art by Chris Buzelli)UPS’ director of public markets will be departing the pension division for the University of North Carolina’s investment office, CIO has learned.

After 14 years at one of the last open defined benefit funds in corporate America, Ed Hetherington has accepted a post with the Chapel Hill, NC-based endowment manager.

Hetherington is due to start his new role as vice president and managing director of public investments in the first half of November. He will report directly to CEO Jonathon King, and work with public assets staff of three directors, one analyst, and two interns.

A spokesperson at the University of North Carolina Management Company (UNCMC) was unavailable for comment.

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Hetherington—as well known for his photography as investing—joined UPS as an intern in 2000, prior to graduating from the University of Pennsylvania. He climbed the ranks over the next nearly decade and a half, culminating with his promotion to public markets head in 2010.

“It’s been the highlight of my career to work with Brian [Pellegrino, CIO] and the team at UPS, and so it’s bittersweet to leave,” Hetherington told CIO when reached for comment. Still, he said, “I am very much looking forward to working with the team at UNCMC and I think it’s a great opportunity to invest for their constituencies.”

Pellegrino lauded Hetherington’s long track record at UPS—one that landed the now-35 year old on CIO’s Forty Under Forty list three years running.

“Ed was a great partner,” Pellegrino said. “We sincerely appreciate his contribution to the success of the UPS Group Trust. UNC Management Company is gaining an outstanding investment professional and his talents will be greatly missed at UPS. We wish Ed the best of luck in his new position.”

Hetherington and his family will be relocating to Chapel Hill from Atlanta, GA in the coming weeks.

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