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Maximizing ESG and Sharpe Ratio: A Dual Perspective on AP Fund Investments - An Analysis of Sustainability and Portfolio Optimization in Swedish National Pension Funds

Atkisson, Saga LU (2025) NEKH03 20242
Department of Economics
Abstract
This paper evaluates the efficiency of the distribution of pensionable income between the Swedish National Pension Funds – AP1, AP2, AP3, and AP4 – and their Environmental, Social, and Governance (ESG) investment preferences. Through portfolio optimization over 21 years (2003-2023), the results reveal nearly perfect correlations between the Funds, indicating limited benefits from diversification. The study supports merging the Funds to create economies of scale and policy compliance without significantly affecting ESG and environmental (E) performance. The Funds are identified as ESG- and E-motivated investors throughout 2015-2023, prioritizing sustainable investments in the Swedish financial market despite inconsistent improvements in... (More)
This paper evaluates the efficiency of the distribution of pensionable income between the Swedish National Pension Funds – AP1, AP2, AP3, and AP4 – and their Environmental, Social, and Governance (ESG) investment preferences. Through portfolio optimization over 21 years (2003-2023), the results reveal nearly perfect correlations between the Funds, indicating limited benefits from diversification. The study supports merging the Funds to create economies of scale and policy compliance without significantly affecting ESG and environmental (E) performance. The Funds are identified as ESG- and E-motivated investors throughout 2015-2023, prioritizing sustainable investments in the Swedish financial market despite inconsistent improvements in performance over time. These findings offer insights into optimizing pension fund strategies and assessing the Funds’ sustainable financial practices. (Less)
Please use this url to cite or link to this publication:
author
Atkisson, Saga LU
supervisor
organization
course
NEKH03 20242
year
type
M2 - Bachelor Degree
subject
keywords
ESG, Sharpe ratio, AP Funds, Portfolio Optimization, ESG-efficient frontier
language
English
id
9183650
date added to LUP
2025-05-16 10:50:55
date last changed
2025-05-16 10:50:55
@misc{9183650,
  abstract     = {{This paper evaluates the efficiency of the distribution of pensionable income between the Swedish National Pension Funds – AP1, AP2, AP3, and AP4 – and their Environmental, Social, and Governance (ESG) investment preferences. Through portfolio optimization over 21 years (2003-2023), the results reveal nearly perfect correlations between the Funds, indicating limited benefits from diversification. The study supports merging the Funds to create economies of scale and policy compliance without significantly affecting ESG and environmental (E) performance. The Funds are identified as ESG- and E-motivated investors throughout 2015-2023, prioritizing sustainable investments in the Swedish financial market despite inconsistent improvements in performance over time. These findings offer insights into optimizing pension fund strategies and assessing the Funds’ sustainable financial practices.}},
  author       = {{Atkisson, Saga}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Maximizing ESG and Sharpe Ratio: A Dual Perspective on AP Fund Investments - An Analysis of Sustainability and Portfolio Optimization in Swedish National Pension Funds}},
  year         = {{2025}},
}