Swedish national pension fund AP2, with assets worth SKr 441 billion ($42 billion; €42 billion), has outlined 10 criteria it wants to see from managers of forestry assets for them to be considered “climate investments”. This is part of a wider effort by the pension to quantify the impact of its “targeted sustainability investments”, affiliate title New Private Markets reported.
“An investment in forests is not automatically beneficial to the climate, but needs to live up to certain criteria in order to be classified as climate investment,” wrote Eva Halvarsson, CEO of the pension, in a statement about its half-year sustainability report. “By climate investments, we mean investments that, in addition to a good risk-adjusted return, aim to contribute to reduced emissions of greenhouse gases and reduce the effects of climate change.”
The report gives five examples of the 10 criteria:
- Managers must have a comprehensive and externally published policy for responsible investments;
- Timberland assets must be managed in a sustainable manner that is verified by a third party through certification;
- Managers of timberland assets integrate TCFD in their reporting;
- Managers must maintain or increase carbon sequestration in the forest;
- Managers must actively contribute to maintaining or increasing biodiversity associated with the timberland.
The pension declined to give the full 10 criteria.
The move to define forestry sustainability requirements is part of a wider effort by the pension to measure and track impact within its portfolio of what it considers to be sustainable investments, according to the report. These comprise certain private equity funds (“with expressed sustainability focus”), sustainable infrastructure, listed cleantech shares, green bonds and social bonds.
The pension is using the Operating Principles for Impact Management and Impact Management Project’s five dimensions of impact to measure its investments’ impact.