Sweden’s premium pension traditional insurance portfolio fossil free

The traditional insurance funds of Sweden’s premium pension is now fossil free, after it began divesting from companies in 2016.

Sweden’s pension authority, Pensionsmyndigheten, revealed that the traditional insurance portfolio has assets worth SEK 45bn that are fossil free. It began opting of companies that produce or distribute fossil fuels as their main business in 2016.

The portfolio is also in the process of excluding companies whose main activities are weapons, alcohol, tobacco, gambling and pornography. Instead, part of the released capital goes to companies that contribute to promoting the UN's 17 global goals for sustainable development.

Commenting, Pensionsmyndigheten head of the fund square department Erik Fransson, said: “We have now changed the portfolio to become fossil-free as the last shares in the gas, coal and oil sectors have been sold. Instead, part of the capital is directed to companies that are part of the solution to our climate problem, for example in renewable energy and energy efficiency. I am convinced that the transition will benefit our savers' return over time, partly because fossil assets can suddenly lose value.”

The traditional insurance is available to savers who wish to switch from unit-linked insurance within the country’s premium pension, the funded part of the earnings-related old-age pension. Those who opt for traditional insurance get a guaranteed income for life, paid monthly. Around 324,000 pensioners have chosen to take out their premium pension as traditional life insurance. However, 1,326,000 pensioners take out their premium pension as unit-linked insurance.

The traditional insurance asset portfolio is managed by Pensionsmyndigheten and consists of interest and shares worth SEK 45bn. The size of the fixed income portfolio matches the sum of the guaranteed amounts of SEK 29bn. The remaining part, 36 per cent or SEK 16bn, is invested in shares. During the first three quarters of 2019, the portfolio's total return was 18 per cent.

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