Absolutely Sustainable Investing Across Asset Classes with Paris Aligned Benchmarks: An Application to AP2

Ekman C, Hoepner A. G. F., Mannerbjörk P., Morsing T. & Zdanceviciute G. (2023) ‘Absolutely sustainable investing across asset classes with Paris-aligned benchmarks: An application to AP2’ In Emmanuel Jurczenko (ed.) Climate Investing: New Strategies and Implementation Challenges. 267-293, Hoboken:

18 Pages Posted: 17 May 2022 Last revised: 30 Sep 2023

See all articles by Claes Ekman

Claes Ekman

Andra AP-fonden

Andreas G. F. Hoepner

Smurfit Graduate Business School, University College Dublin; European Commission - DG FISMA

Peter Mannerbjörk

Andra AP-fonden

Tomas Morsing

affiliation not provided to SSRN

Gabija Zdanceviciute

Smurfit Graduate Business School, University College Dublin

Date Written: April 11, 2022

Abstract

This manuscript presents a case study of EU Paris Aligned Benchmark (PAB) implementation across different asset classes in a Swedish state pension fund AP2. Three significant contributions are made. First, the manuscript introduces a notion of Absolutely Sustainable Investing based on the EU climate benchmark principles. Second, the AP2 case study details the implementation of PAB principles across a range of asset classes, including developed and emerging market equities and fixed income, as well as Swedish equities, while outlining relevant considerations. Third, the manuscript highlights the inflation adjustment of the GHG emissions intensity as a cornerstone aspect in achieving net zero targets. The AP2 case study outlines data quality and data infrastructure as the two key challenges of PAB implementation. Nonetheless, AP2 express their support for PABs as it is their belief that portfolios can be PAB-aligned without compromising the risk-return profile. The manuscript concludes with a discussion on the GHG-intensity metric as well as suggestions for further research on the enterprise value including cash (EVIC)-inflation adjustment factor.

Keywords: Paris Agreement, Climate Investing, Net Zero, Multi-Asset Investing, Absolutely Sustainable Investing, Climate Benchmarks

JEL Classification: G3, G11, G23, Q2, Q5, Q50, Q54, Q58

Suggested Citation

Ekman, Claes and Hoepner, Andreas G. F. and Mannerbjörk, Peter and Morsing, Tomas and Zdanceviciute, Gabija, Absolutely Sustainable Investing Across Asset Classes with Paris Aligned Benchmarks: An Application to AP2 (April 11, 2022). Ekman C, Hoepner A. G. F., Mannerbjörk P., Morsing T. & Zdanceviciute G. (2023) ‘Absolutely sustainable investing across asset classes with Paris-aligned benchmarks: An application to AP2’ In Emmanuel Jurczenko (ed.) Climate Investing: New Strategies and Implementation Challenges. 267-293, Hoboken: , Available at SSRN: https://ssrn.com/abstract=4081244 or http://dx.doi.org/10.2139/ssrn.4081244

Claes Ekman

Andra AP-fonden ( email )

Östra Hamngatan 26
Gothenburg, 40424
Sweden

Andreas G. F. Hoepner

Smurfit Graduate Business School, University College Dublin ( email )

Blackrock, Co. Dublin
Ireland

European Commission - DG FISMA ( email )

2 Rue de Spa
Brussels, 1000
Belgium

Peter Mannerbjörk

Andra AP-fonden ( email )

Östra Hamngatan 26
Gothenburg, 40424
Sweden

Tomas Morsing

affiliation not provided to SSRN

Gabija Zdanceviciute (Contact Author)

Smurfit Graduate Business School, University College Dublin ( email )

Blackrock, Co. Dublin
Ireland

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