SWEDEN - AP3, Sweden's third national pension fund, is looking for a corporate social responsibility research firm to screen its SEK23bn Swedish holdings.
In August the SEK126.5bn fund announced its intention to adopt a new active corporate governance policy, aimed at stepping up the fund’s shareholder activism. The move stemmed from legislation passed in 1999 which required the newly set up state pension funds to account for environmental and ethical criteria.
AP3 aims to implement its socially responsible investment (SRI) strategy, based on conventions from the International Labour Organisation (ILO) and United Nations (UN), for example, through a process of ‘active engagement’ - screening and dialogue - although it has not dismissed excluding companies from its portfolio as a last resort.
A spokeswoman for the fund said: “Our first step is to engage in dialogue. We see a clear trend with pension funds worldwide that engagement is becoming more important. But of course we could see a situation where we think that the offence is so severe [and] the company doesn't respond. Then we will have to decide what to. But [for] now we hope that companies will listen to our views.”
The firm will be required to screen all SEK20.4bn Swedish equity- and SEK2bn corporate bond holdings. But this process might be extended to equity holdings across Europe, the US, Japan and Asia-Pacific. AP3 said that it would be an “advantage” if applicants could offer research in these areas also.
Earlier this year, AP7 axed over 20 corporate giants from its portfolio after alleging violations of its SRI requirements, including those on child labour and bribery and corruption. However, AP3 explained that its approach is different because, unlike AP7, it is permitted to vote on shares.
One firm thought to be a hot favourite to win the mandate is Stockholm-based Caring Company Etikanalytikerna. Caring already screens companies for AP7. The firm has also recently been appointed to Scottish Widows Investment Partnership’s new Global SRI Equity Fund to provide an SRI overlay strategy.
Details can be downloaded at www.ap3.se. The last response date is September 23, 2002.
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