Swedish Pension Fund Divesting from Nukes, Oil Sands Companies

Swedish pension provider AP4 is eliminating nuclear weapons and oil sands from its $40 billion portfolio following new legislation that took effect January 1.

“AP4 believes that the modernizations and upgrades of existing nuclear weapons systems that are now taking place are not in accordance with the spirit of the Non-Proliferation Treaty for Nuclear Weapons, which aims to abolish nuclear weapons in the long term,” the firm said in a release.

The organization’s decision to remove the oil sands stocks is aligned with the Paris Agreement’s aspirations for a low–carbon environment.

“Oil sand is a fossil energy source with high carbon dioxide emissions per energy unit and AP4 believes that this must be phased out in a global transition to a low-fossil society, in line with the UN Climate Convention and the Paris Agreement,” the fund said, adding that this move is a continuation of its climate reduction strategy. “Since then, AP4 has chosen to remove companies with the relatively largest emissions of greenhouse gases and fossil reserves through its low–carbon investments.”

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AP4 also does not own any coal companies.

The laws allow Sweden’s four AP pension funds to make more illiquid and alternative investments than before.

In 2018, AP4 sold 45 nuclear weapons businesses and five oil sand companies, worth $332 million, according to IPE.com. Profits were reinvested into the global equity portfolio.

“We welcome the fact that sustainability is now introduced in the legislative text with the clarification that the administration should be exemplified through responsible investments and responsible ownership,” said Niklas Ekvall, AP4’s CEO. “In connection with the implementation of the new rules for sustainable management, we choose to further increase our ambitions and opt out of investments related to nuclear weapons and oil sands.”

Tags: AP4, Divestment, Nuclear Weapons, oil sands, Sweden

It came about all of a sudden. A troublesome stock market, barely helped by an infinitesimal Santa Claus rally, created a problem for the University of California’s endowment, leading to a $9 billion loss in the period.

“Overall, I think things turned pretty quickly in the fourth quarter of the year … into negative territory,” said Jagdeep Bachher, the endowment’s chief investment officer, adding that fixed-income also caused disruption in the portfolio’s strategy.

The University of California’s considerable loss led total assets to close 2018 at $114 billion, according to the institution’s January 15 board meeting. The $53.1 billion public equity portfolio had been cut to 47% of assets, down from 52% at September’s end, when they totaled $123.1 billion.

Ronnie Swinkels, the endowment’s managing director and head of active equity, cited the Federal Reserve’s December interest rate hikes, trade tensions, economic slowdown concerns, and fears of the now-realized government shutdown as reasons for the hit.

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“If we look at the numbers, the US had been outperforming for almost the entire calendar year of 2018. That changed quite quickly in December,” said Swinkels in a video broadcast of the meeting. The S&P 500 lost 4.5% last year, a lot of that coming from slumping tech stocks such Apple and Facebook. “If you look at our fiscal year, since July 1, equity markets are down about 10% in December.”

“The biggest shift was really in the pension by about $5 billion,” Bachher said. “If you keep in mind that the pension is about half public equities and if you look at what happened in the markets, down anywhere from 10% to 20% depending on where you are, that was the biggest driver in terms of the move in the assets under management.”

UC Regent’s asset allocation as of December 31 was 46.7% public equity, 32.4% fixed income, 6.6% absolute return, 4.7% real estate, 3.3% cash, and 1.7% real assets.

Tags: Endowments, Stocks, UC Regents, University of California