AP4 appoints Northern Trust to provide low carbon emissions emerging markets fund
The Fourth Swedish National Pension Fund (AP4) will invest in a new emerging markets fund which comprises only companies that have both lower carbon emissions and less fossil fuel reserves.
The fund, created by Northern Trust’s asset management arm, is a new sub-fund of an existing Irish UCITS umbrella fund known as Northern Trust Investment Funds plc and will be made available to other institutional investors in Europe in accordance with the UCITS Directive.
The Northern Trust Emerging Markets Custom Low Carbon Dioxide Equity Index Fund has been designed to offer AP4, and other future investors, exposure to the potential growth and diversification benefits of emerging markets whilst potentially lowering long-term portfolio risk by excluding both companies with high greenhouse gas emissions and companies that have extensive reserves of fossil fuels in addition to incorporating other environmental, social and governance factors.
“With few exceptions, carbon dioxide is now widely recognised to have a negative impact on the climate,” says Mats Andersson, chief executive at AP4. “We believe that greenhouse gas emissions are associated with higher costs in the long term and that consequently companies with higher carbon footprints will be valued differently in the future. Hopefully this will also increase the pressure on companies to lower their carbon dioxide emissions.”
This latest equity fund from Northern Trust follows its announcement earlier this year that it had, in collaboration with MSCI ESG Research and Institutional Shareholder Services (ISS), created the first emerging markets custom index to incorporate environmental social and governance screens.
“Combining return seeking assets with ESG criteria is a trend that continues to grow as institutional investors realise they can simultaneously incorporate environmental criteria into their portfolios while gaining the desired exposure,” says John Krieg managing director for Northern Trust’s asset management arm in Europe, Middle East and Africa. “We are pleased to work in partnership with AP4 in implementing this low carbon solution.”
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