The APK Pensionskasse AG (APK) sees itself as a long-term investor and is convinced that the integration of ESG criteria in the investment approach brings added value.
 
Companies that integrate material ESG aspects tend to demonstrate greater operational efficiency, innovation, and resilience, which can translate into long-term growth and profitability. However, we do not share the assumption that sustainable investing always and immediately leads to higher returns. Rather, the integration of sustainability criteria into the investment process should be understood as part of risk management and contribute to reducing or at least better understanding the risk taken. In this sense, the integration of sustainability criteria should contribute to making better investment decisions in the long term.
 

Is sustainable investing only relevant as a risk management tool for pension funds?

 
Sustainable development and assuming responsibility for the environment and society are very important to APK. This approach is consistent with the Austrian Pension Fund Act, which stipulates that assets should be invested for the greatest possible long-term benefit of the beneficiaries. What may seem contradictory at first glance is united in APK's investment approach: regulatory requirements and the achievement of social and/or ecological improvements.

This approach is consistent with the Austrian Pension Fund Act, which requires that assets be invested for the greatest possible long-term benefit of the beneficiaries.

Poul Thybo

How can pension funds contribute to positive development with their sustainable investments?

 
When many investors commit to investing only in companies that operate sustainably, this creates leverage and motivates other companies to improve as well. The issue of reputational risk is also relevant for us as a public investor: Who, for example, would want to buy shares in a company that explicitly declares itself to be unsustainable?
 
In order to achieve the goal of sustainable development, other actors are required in addition to us as financial investors:

1. Framework conditions: Policymakers must create the foundations for sustainable change in consumer behavior through targeted framework conditions. Subsidies, tax measures, or priority programs can be effective steering elements in this regard.
2. Consumers: They are required to focus their purchasing behavior on sustainable and regional offerings.
3. Financial investors: They should and must contribute to increasing long-term investments in sustainable economic activities and projects. This can be done either broadly (e.g., in line with the United Nations' 17 Sustainable Development Goals (SDGs)) or with a focus on specific areas such as climate protection. Many investors, including the APK, have set different priorities over time.

What has the APK done so far?

 
APK Pensionskasse AG began developing a sustainability approach back in 2006, introduced in light of increasing globalization and accelerated by China's accession to the WTO in 2001. The goal was to review the companies in its portfolio for their social and environmental responsibility. The UN Global Compact, which sets out principles in the areas of labor standards, human rights, environmental protection, and anti-corruption, served as a guide for APK.

APK sets high standards for the sustainability quality of its portfolio and its individual components.

Poul Thybo

In collaboration with external experts, semi-annual reviews of portfolio companies were conducted to ensure that the companies in the portfolio meet basic social and environmental standards. Because the ESG concept was never viewed as a static project, but rather as a process requiring ongoing improvements and further development, APK expanded its sustainability focus to include aspects such as energy efficiency and the use of raw materials. Through collaboration with a new partner (MSCI ESG), the review options were further expanded. This enables a differentiated assessment of sustainability. The resulting framework was documented in the internally developed sustainability concept, "APK Responsible Investment Guidelines."
 
The increased focus of legislators on integrating sustainability, especially climate protection, into the regulatory and supervisory framework of the financial sector has contributed to the fact that, in addition to the self-imposed targets of financial investors, regulatory requirements now also have to be met. This also applies to the APK, which must, in particular, comply with the requirements of the Disclosure Regulation and, in the future, possibly also with sustainability reporting according to EU standards.
 

Internationally oriented investment policy

 
APK's investment policy is broad and internationally oriented. Its portfolio encompasses various investment instruments and asset classes, broadly diversified across all major global markets. In practice, this means that ESG data from many, sometimes very different, asset classes (equities, bonds, alternatives, etc.) must be collected, processed, and evaluated. To establish a standard that works for all asset classes and is applicable to all external managers, APK's sustainability concept has been further developed.
 

Exclusion and positive criteria

 
The evolution from the "APK Responsible Investment Guidelines" to the "APK Delta" represents a comprehensive and determined sustainability development that integrates both exclusionary and positive criteria and is supported by rigorous analysis and evaluation processes. With this development, we aim to underscore our commitment as a leading sustainable investor that continuously improves its practices to meet global sustainability requirements.

In summary, we focus our investment decisions on the sustainability goals of "Do no harm," "Invest for change," and "Improve transparency." APK sets high standards for the sustainability quality of its portfolio and its individual components. The "APK Delta" sustainability concept is applied to all asset classes and client portfolios (investment and risk sharing groups). The concept and the documents on sustainability-related disclosure requirements are available on the APK website .

Is the work worth it?

We can answer this question with a resounding "yes." We have succeeded in making the portfolio more sustainable without any deterioration in performance. Quite the opposite: APK's performance has been above the market average for many years (see: Annual Report 2023). Risk hasn't increased either. The investment portfolio remains very broadly diversified and exhibits no "concentration risk" in specific sectors (e.g., renewable energies) or individual companies. Why did we do this? The world is facing many major problems, and we want to help find solutions without reducing long-term investment results.

Poul Thybo has held various roles within the APK Group since 2006. He has been Head of Investment at APK Pensionskasse AG since 2022. He has also been active internationally, including at the Copenhagen Stock Exchange.