Steady at the helm: what AP3’s half year results suggest about its climate commitments

The Third Swedish National Pension Fund (AP3) has announced results for the first half the year. In H1 2025, the fund reported a return of 0.7% after expenses. Profits for the period stood at SEK 3.94m (approximately $0.4m) and fund capital stood at SEK 550.6bn (over $58bn). Over the past five years, the fund reported an average return of 8.5% compared to the 10-year average of 7.8%.

For H1 2025, the largest return contribution came from listed equities, which accounts for 52.1% of the fund’s exposure. Despite this, AP3’s equity management return underperformed its benchmark, courtesy of volatility in global equity markets.

From the perspective of the fund’s climate commitments, returns from its fixed income and alternatives exposures are particularly relevant:

Bond tilt

Amidst a turbulent first half for listed equity markets, AP3’s fixed income portfolio delivered more promising news.

“Fixed income management navigated the turbulence with a steady hand, outperforming its benchmark index by 0.56 per cent”, says Staffan Hansén, AP3’s chief executive.

AP3’s sustainable bond tilt is a defining characteristic of its fixed income allocations.

Back in 2008, the Swedish asset owner was amongst the early backers of the World Bank’s first green bond. In 2013, AP3-backed Swedish property developer Vasakronan became the world’s first issuer of corporate green bonds. In 2014, AP3’s green bond holdings stood at SEK 3.8bn. By 2024, this had increased to SEK 24.8bn.

Since then, AP3’s internally managed bond portfolio has embraced a burgeoning appetite for both green bonds and SLBs.

“25% of the fixed income portfolio shall be invested in sustainable bonds by 2025. We are well on our way to reach that goal”, a spokesperson for AP3 told Net Zero Investor.

At the end of 2024 that number stood at 24.8%, the spokesperson confirmed.

Timber returns

For AP3, the most significant headwind in the first half of the year came through the a more expensive krona. Currency appreciation meant the value of AP3’s foreign holdings fell as a result.

Amongst AP3’s foreign holdings is a portfolio of timberland assets, 67% of which are in the US.

For these assets, half-year returns are less insightful indicators of performance. “The return for a short period such as a half-year is difficult to use for assessing performance especially H1 numbers as revaluations are done annually for most of the portfolio”, said the spokesperson.

Over the longer term, returns from AP3’s timberland holdings have exceeded the fund’s expectations. This continues to be the case, according to the spokesperson.

“AP3’s timberland portfolio has returned well above expectations over the past five years, with an average annual return of 9.3 percent over the last five years — and it continues to perform well”, the spokesperson confirmed.

Timberland forms part of AP3’s alternative investments portfolio which currently accounts for 27.5% of the fund’s exposure.

Positive fixed-income returns for H1 2025 combined with above-average, long-term timberland returns are set against the backdrop of AP3’s journey to net zero portfolio emissions by 2045. Results from the first half of the year therefore feed into the fund’s climate commitment, which is seemingly steady at the helm.