In 2018, new, internally created, multi-factor indices with sustainability aspects were implemented for the foreign shareholdings. The Fund worked on further development of the indices in 2019, and also on creating similar indices for the credit portfolios, which the Fund hope to be able to launch in 2020.
At the end of 2016, a project was initiated with the aim of replacing the current six single factor indices with two new ones; one for developed countries and one for emerging countries. These two indices would reflect all the properties that AP2 is seeking exposure to, so-called multi-factor indices.
Including exposure to companies with a good ESG profile in the indices has been especially important for AP2. That is why the Fund’s new indices consider many different aspects of climate and environment, social factors and corporate governance factors during index construction. For example, equities in companies with low carbon dioxide emissions or that have many women employees are favoured, while equities in companies that are often involved in a variety of controversies or that attempt to devote themselves to manipulative accounting will receive a lower index weighting.
AP2 analysed which properties that were interesting to have in the new indices and concluded to have exposure to four properties, but just two indices. This means that the Fund have designed the indices for the benefit of equities in companies that have a low value and a good ESG profile, and equities whose returns are low volatile and independent of the returns of other equities.
When the Fund tested the indices on historical data, the Fund saw that ESG could be evaluated higher than the other three properties without sacrificing the return or increasing the risk. This is completely in line with the Fund's assignment.
Read an interview (PDF document, 174 kB)with the managers of the indices.