Announcing its investment on Wednesday, Copenhagen-based AP Pension said that, while it supported efforts to reduce global carbon emissions, its primary reason for investing in the fund was to secure ‘good returns’ for its customers.

  • AP Pension says investment’s prime objective is to secure ‘good returns’ for customers
  • MSIM’s 1GT fund held first close at $500mn in May, has target size of $1bn
  • Impact investing market has grown to more than $1tn, according to GIIN

June 8 (Preqin News) - Danish pension fund AP Pension has invested over €75mn ($81mn)  in the Morgan Stanley Investment Management (MSIM) 1GT climate private equity fund, which held its first close at $500mn last month.

Announcing its investment on Wednesday, Copenhagen-based AP Pension said that, while it supported efforts to reduce global carbon emissions, its primary reason for investing in the fund was to secure ‘good returns’ for its customers.

MSIM, which has a $200bn alternatives investments business, says that its 1GT strategy specifically aims to avoid or remove 1 gigaton of CO2-equivalent emissions by 2050. The fund, which has a target size of $1bn, invests in companies in mobility, power, sustainable food and agriculture, and the circular economy, and is an Article 9 fund under the EU’s Sustainable Finance Disclosure Regulation (SFDR).

While AP Pension aims for all its investments to be climate neutral by 2050, the fund was firm about its reasons for its latest investment. Head of Alternative Investments Helle Ærendahl Heldbo said: ‘Our investment in the fund is not based upon a philanthropic mindset. We are primarily investing in it because we believe that it will be able to deliver good returns for our customers.’ 

The global market for impact investing, where investments are intended to deliver social and environmental benefits as well as financial returns, has grown to more than $1tn, the Global Impact Investing Network estimates. There are almost 200 private equity impact funds with vintage years from 2020 to 2023, with aggregate fund sizes of over $47bn, according to Preqin data. Over half of these are focused on Europe, North America, or the US specifically. Whilst the sector has grown significantly, that number represents only a fraction of the global private equity universe, however, which comprises almost 19,000 funds with vintage years 2020 to 2023. 

Speaking at the time of 1GT’s first close, MSIM’s Head of Climate Private Equity Investing and 1GT, Vikram Raju, said: ‘Reaching our halfway goal is an important milestone. Our anchor investors have demonstrated a strong level of climate ambition by backing 1GT with its twin goals of investing in compelling high-growth companies in Europe and North America, while aiming to deliver transformational climate impact at the gigaton level.’

As an Article 9 fund, 1GT adheres to the EU’s SFDR, designed to boost transparency in sustainable investment. Article 9 requires that a fund must have sustainable investing as an objective, and be able to show how environmental, social, and governance (ESG) characteristics are implemented or involved in investments. 

AP Pension, meanwhile, is making a broader push in ESG investing. It has recently tightened its fossil fuel investment criteria, adding Shell and TotalEnergies to its exclusion list, and setting targets for reducing CO2 in its property portfolio.