AP2, Gothenburg, Sweden joined forces with Germany-based sustainable finance think tank Climate & Co. to systematically identify deforestation exposure in global portfolios.
Climate & Co. will create the framework for assessing deforestation exposure and will test it on AP2's listed equities holdings.
The pension fund had 423.9 billion Swedish kronor ($39.1 billion) in assets as of June 30, with a total 38.3% exposure to listed equities across Swedish, developed markets and emerging markets, according to its half-year report.
The aim is to highlight existing data resources and pinpoint any apparent gaps in the assessment of deforestation exposure in global portfolios, a news release said. The collaborative approach offers investors guidance on systematically identifying potential exposure to deforestation and is publicly accessible.
It aims to provide the required resources, minimize the time and staff resources needed to fulfill deforestation-free commitments, and show regulators that existing data and tools — while sufficient to get started — have "crucial gaps that, when addressed, will simplify evaluations in future," Malte Hessenius, analyst at Climate & Co., said in the release.
Biodiversity is "declining faster than at any time in human history, with far-reaching and irreversible consequences," the release said. Deforestation and land conversion are some of the main drivers of biodiversity loss and climate change, it added.
AP2 is a signatory to the Financial Sector Commitment on Eliminating Agricultural Commodity-Driven Deforestation, and aims to eliminate any contribution to deforestation in its portfolio by 2025. Executives have also committed to net-zero greenhouse gas emissions by 2045.
"We in the financial sector have a key role to play in accelerating the transition towards a deforestation-free economy through engagement with our portfolio companies and by reallocating capital," Asa Mossberg, sustainability strategist at AP2, said in the release. "Through the collaboration with Climate & Co., AP2 is contributing to the development of practical guidance that becomes public, and that the financial sector can use to map and quantify the deforestation risk in their portfolios."
The initiative is funded by the Gordon and Betty Moore Foundation, a U.S. foundation that was established to create positive outcomes for future generations.