Swedish pension fund AP2, Stockholm, returned 5.9% in 2023, according to an annual report released Feb. 9 citing strong equity returns that offset weak real estate performance. A detailed report will be available in March.
Last year was a 12.6 percentage point improvement over 2022 for the 426 billion Swedish Kronor ($40.7 billion) pension fund. Annualized returns for five and 10 years were 6.6% and 6.8%, respectively.
It was an "eventful year" that included challenges from inflation and interest rates, AP2 managing director Eva Halvarsson said in a statement. Pension fund officials made several management and governance changes in 2023. "We have really turned over all the stones" to improve returns," Halvarsson said.
One change was cutting the budget by 16% by bringing most externally managed mandates in-house, and discontinuing management of Chinese A shares, as well as moving to smaller offices.
In a 2023 sustainability report also released Feb. 9, AP2 said it made progress in five focus areas, including defining climate transition plans for additional asset classes and expanded reporting of emissions data.
Total carbon emissions including Scope 3 decreased 25% from the previous year for the 70% of the portfolio covered by the report. Since 2018, total measured carbon emissions dropped roughly 48%.
AP2 was an early adopter of a biodiversity disclosure framework from the Taskforce on Nature-related Disclosures and is now collaborating with think tank Climate & Company to systematically identify deforestation exposure in its global portfolios. The idea it to create a publicly available tool that will be applied to AP2's holdings in listed equities, Halvarsson said in a separate statement.
Corporate governance activity in 2023 included expanded voting in Swedish and foreign companies and discussions with Swedish companies regarding incentive schemes that lack performance-related goals and sustainability goals, she said.