The 3,500 companies in which the AP funds invest will be screened to identify possible violations of international norms and conventions. Each year, about 10 companies will be selected for further dialogue to improve their records.

The aim is to make three to five companies a year change their ethics, according to AP 1’s Nadine Viel Lamare, who is also chairman of the ethics council. She would not comment on which companies the council were being selected for further dialogue, but added that it was no secret that there was concerns over both Wal-Mart and Yahoo.

Co-operation between the funds started last year, when they began to co-ordinate their analysis and tenders of SRI. “The main objective of working together is to become more efficient,” says Ms Viel Lamare. The funds have net assets under management of around SKr800bn (€87.9bn) and investments in around 3,500 companies. “The council allows us to combine our resources and enables us to become a big player internationally. One AP fund is small, but we are big together,” says Carl Rosén, AP 2’s representative in the ethics council.

Out of the four funds, AP 1, AP 3 and AP 4 have previously awarded mandates to GES, but AP 2 has only collaborated with GES on an ad hoc basis. “Around 15 candidates handed in offers and we looked at a handful more closely,” says Ms Viel Lamare. “GES was chosen due to its comprehensive solution for the whole process.” High competencies, length of experience and a competitive offer were said to be other factors influencing the decision, as well as GES’s geographical proximity and ability to communicate in Swedish.

Ms Viel Lamare would not reveal the other candidates in the beauty parade, but they are said to be known Swedish and foreign firms. “From our point of view it will be very stimulating to work with the four AP funds as one,” says Magnus Furugård, president of GES Investment Services. Despite the award, GES is not planning any new staff hires. The firm will carry on with the same team as before, but Mr Furugård believes the firm will continue to grow.

The collaboration does not include screening Swedish companies – an area where the AP funds will continue to work individually. The funds see themselves as well-equipped enough to cope with the domestic market alone and are also prevented from collaboration in some areas due to parliamentary regulation.

Although this is the first time the funds are co-operating, Ms Viel Lamare does not believe this will kick start collaboration in other areas. “This is a one-time collaboration. We felt that we had something to gain by co-operating in this area and it was also feasible,” she says.

Putting performance first

The objective of the AP funds is to take ethics and environmental issues into consideration without affecting its long time pursuit of returns. Mr Furugård at GES believes there has been a break-through in the Swedish market for SRI. “Five years ago, SRI was regarded as an obligation and something you had to be involved in. Today, there is more knowledge out there and a feeling that this is something one should do,” Mr Furugård says.

AP 1 recently persuaded the Marriott hotel chain to revise its human rights policies and take a stand against child sex tourism. In September last year, AP 2 decided to sell its shares in Wal-Mart, which has been accused of workers rights violations.

The AP funds have, however, been criticised for their direct investments in Russian gas company Gazprom as well as in investment company Vostok Nafta, which has 90 per cent of its assets in Gazprom. The Russian gas firm is accused of environmental, human rights and corruption failings.

The ethics council has one representative from each of the four AP funds, and the chairmanship will be rotated on an annual basis. “It came naturally that AP1 would hold the first chairmanship; we have good experience and have long worked with European companies with these questions,” says Ms Viel Lamare. The ethics council will meet around four times a year and is to produce a report on its findings and the companies they are engaged with at the beginning of 2008.

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WHO'S WHO ON THE ETHICS COUNCIL

• Nadine Viel Lamare (AP 1, chairman)
• Carl Rosén (AP 2)
• Christina Kusoffsky Hillesöy (AP 3)
• Annika Andersson (AP 4).
• AP 1 has SKr207.1bn (€22.4bn) in assets under management
• AP 2 has SKr216.8bn (€23.5bn) in assets under management
• AP 3 has SKr212.2bn (€22.9bn) in assets under management*
• AP 4 has SKr200.6bn (€21.7bn) in assets under management

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