Alecta’s interim targets on the pathway to net-zero

Alecta is one of the founding members of the UN-convened Net-Zero Asset Owner Alliance (AOA), and has also been part of developing the Target Setting Protocol. It is based on the latest international climate research and is currently one of the most ambitious climate guidelines for investors. Ultimately, the objective of the initiative is to achieve change in the real economy, and each member is to set their own targets with regard to engagements and sub-portfolio carbon footprint reductions based on the IPCC’s 1.5 degrees scenarios.

In the first phase of the Target Setting Protocol, members of the AOA will adopt reduction targets for 2025 that cover the asset classes listed equity, corporate bonds and directly owned real estate.

- We have very concentrated portfolios, mainly based on our own fundamental analysis. Our equity portfolio, as an example, only consists of around 120 companies. This means that we know what we invest in, and can use our ownership to engage, follow-up and support the companies we invest in to transition to a low-carbon economy, says Peter Lööw, Head of responsible investment at Alecta.

Alecta’s interim goals in accordance with the AOA protocol for 2025 are:

Engagement:

• Focused climate related dialogues with 20 companies in accordance with the AOA’s engagement strategy 

Emission reduction targets:

• Listed equity: 25 % tons CO2 (scope 1+2) per million SEK in revenue
• Corporate bonds: 25 % tons CO2 (scope 1+2) per million SEK in revenue
• Directly owned real estate: 50 % kg CO2 (scope 1+2) per square mete

Financing transition:

• Transparency regarding green investments
• Participate in 4 round tables and initiate dialogue with 2 DFI’s (Development Finance Institutions)

Alecta’s portfolio - current status and going forward

Due to the long-term nature of Alecta’s investments it is essential to understand the value chain emissions for each holding, and foremost the opportunities and challenges that the business model in itself presents when it comes to transition.This translates into consideration of aspects such as innovation, procurement, consumer behavior and regulation. An ambitious climate target can serve to indicate a company’s direction

Not all companies in Alecta’s equity portfolio have set climate targets, and sometimes targets are too vague or simply insufficient. Alecta has a process for identifying portfolio companies that are relevant for more focused climate engagement.

- Many of the companies we invest in have an ambitious approach to climate. For example, 77 percent of the companies we invest in report scope 1 and 2 emissions, and the share of companies that have approved Science-Based Targets is 17 percent. In addition a further 11 percent of the companies has committed to setting a Science-Based Target. However, there is room for improvement. Our ambition is to support our holdings in their transition. Leading up to 2025, this involves having dialogues with those companies in our portfolio that have not yet set climate targets, to follow up with those who do have targets, and an overall focus on enhancing the quality of data and reporting from all companies, says Peter Lööw.

The interim targets serve as a basis for evaluation of each investment. It gives the portfolio managers and the analysts a context to whether companies are on track for 2025 and will be used as a point of reference in dialogues with the specific companies.

Results from the climate report

• Since 2016, the carbon footprint intensity of the equity portfolio has decreased from 4,7 CO2e /million in revenue to 2,8 CO2e /million in revenue. Considerably below the intensity level of Alecta’s ESG-tilted benchmark.
• In 2020, Alecta engaged in 44 ESG dialogues, up from 18 in 2018. Climate has been the dominant topic.
• By end of 2020, Alecta’s portfolio included more than 50 billion SEK in green bonds, up from 31 in 2018, and more than 14 billion SEK in other clearly sustainability related assets, such as social or impact bonds.
• In the Swedish real estate portfolio, Alecta doubled the number of environmentally certified properties between 2018 and 2020, and cut the carbon footprint generated from energy procured for our properties with 50 percent.

For further information, read our TCFD report: alecta-klimatredovisning-2020.pdf (in Swedish)

Contact:

Hannes Hultcrantz, PR-Director

Hannes.hultcrantz@alecta.se
+46 733 10 06 01

Peter Lööw, Head of Sustainable Investments

Peter.loow@alecta.se
+46 706 19 90 79