Swedish pension fund AMF has warned that the rise of passive global index funds poses a growing threat to Sweden's model of corporate governance and the country's ability to meet long-term climate and sustainability goals.

In its 2024/2025 ownership report, AMF argued that without active, engaged investors to hold companies accountable, both financial returns and vital climate transition work are at risk.

AMF's report defended Sweden's tradition of active ownership, in which investors, such as pension funds, families, and industrial actors, play a hands-on role in corporate governance.

The model, it argued, has been central to Sweden's economic success, innovation, and robust capital markets.

Indeed, AMF manages a total of around SEK 850bn and was the Stockholm Stock Exchange's third-largest active owner at the time of the report's publication.

During 2024/2025, AMF was represented in 39 nomination committees and participated in 80 ordinary Swedish general meetings and six extraordinary general meetings.

However, AMF warned that the system was being eroded by the growing dominance of global index investors, who remained passive in key governance processes, such as nominating board members or enforcing accountability.

"The large, primarily foreign, index giants are significant owners on the Stockholm Stock Exchange, and their share is growing. We increasingly see them as the largest, second largest, or third largest owners in major and important Swedish companies," the report said.

"Ownership should come with responsibility," added AMF head of equities and ownership, Anders Oscarsson.

"Too often, the largest shareholders in key Swedish companies remain absent when it really matters.

"Such ownership should come with responsibilities, but unfortunately, these investors rarely live up to them. They seldom take seats on nomination committees and often deviate from standard practices, for example, around the discharge of liability," he added.

The report also linked the dilution of active ownership to a weakening of corporate climate progress.

AMF highlighted that Swedish institutional investors have played a crucial role in encouraging companies to adopt science-based climate targets and credible transition plans.

Without this pressure, AMF suggested, listed companies may prioritise short-term interests over sustainability.

Notably, AMF's climate strategy includes structured engagement with the 20 largest carbon emitters in its portfolio, aiming to ensure alignment with the goals of the Paris Agreement.

In 2024, the fund also exited its holding in Tesla after concluding that its long-running engagement on human rights and climate governance had failed to deliver sufficient change.

"To meet Sweden's and Europe's climate goals, we need more owners who are willing to stay engaged over time," said AMF head of sustainability, Jens Schlyter.

"Passive capital simply won't get us there."

Consequently, the report urged that upcoming reforms to Sweden's AP funds and the structure of public pension capital consider the value of active stewardship.

AMF suggested that too much reliance on low-cost passive strategies risks undermining both financial outcomes for savers and Sweden's influence over its own companies.

Commenting on the 2024-2025 ownership year, AMF head of asset management, Katarina Romberg, claimed it was characterised mainly by the new American administration's protectionism and tendencies towards isolationism.

"The strong start of the year was followed by a time of major movements in the world's stock markets. Uncertainty remains high, and the importance of active ownership work is greater in times like these," she explained.

"My firm belief is that the work of AMF and other active Swedish owners makes a difference, and that we play an important role in the companies' long-term development and success," added Romberg.

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