Sweden’s AP2 is divesting its holdings in 28 power utility stocks with a combined market value of SEK670m (€72.2m) following its second climate-risk assessment.

The SEK300bn pensions buffer fund said the profits of all of the companies whose shares it was now offloading came primarily from the carbon-based generation of electricity.

These companies also lack any convincing strategy for diminishing their climate impact, it said.

Eva Halvarsson, chief executive at AP2, said: “The decision involves disinvestment from approximately one-quarter of all electricity-generating companies, reducing the fund’s exposure to financial risk in the power sector. 

“Our potential for generating value over the long term is greater if we invest in other companies instead.”

AP2 said the assessment had been based on a financial perspective and carried out because of the fund’s commitment to “address ethical and environmental concerns without compromising the overall target of a high return on invested assets.”

The first climate risk assessment the pension fund did took place in 2014 and concerned fossil-fuel companies.

That investigation led to the fund’s selling off holdings in 12 coal producers and eight oil and gas companies.

AP2 said it would continue to assess the climate risks posed by its holdings over the next few years.

In the next phase of this process, it aims to do an overall assessment of the portfolio involving several different climate scenarios, to understand more about how the pension fund’s investments are affected.

AP2 declined to name the power utility stocks now being sold.

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