Navigating steadfastly: AP3's half-year financial results hint at its environmental pledges

The Third Swedish National Pension Fund (AP3) reported a return of 0.7% after expenses for the first half of 2025, with fund capital standing at SEK 550.6bn (over $58bn). This modest return was overshadowed by the impressive performance of AP3's timberland portfolio and fixed income allocations.

AP3's timberland portfolio, which accounts for 27.5% of the alternative investments portfolio, has been a standout performer. Over the past five years, the portfolio has averaged a return of 9.3% annually, exceeding expectations and contributing significantly to AP3's long-term growth. The spokesperson confirmed that the timberland portfolio continues to perform well. However, the return for the timberland holdings over the longer term is not specified.

Half-year returns for AP3's timberland assets are not reliable indicators of performance due to annual revaluations. Nevertheless, the positive returns for H1 2025 are a promising sign for AP3's goal of achieving net zero portfolio emissions by 2045.

AP3's fixed income portfolio also outperformed its benchmark index by 0.56% in H1 2025. The Fund's green bond holdings, which increased from SEK 3.8bn in 2014 to SEK 24.8bn by 2024, played a crucial role in this success. AP3 has a sustainable bond tilt in its fixed income allocations, and aims to have 25% of its fixed income portfolio invested in sustainable bonds by 2025.

Listed equities account for 52.1% of the fund's exposure, but the 10-year average return for the fund is a robust 7.8%. AP3 was the first in the world to issue green bonds for the corporate sector through the company Vattenfall in 2013, demonstrating its commitment to sustainable investing.

AP3's timberland portfolio is primarily located in the US, making up 67% of the foreign holdings. The return for AP3's timberland holdings over the longer term is not specified, but the strong performance over the past five years is a positive indicator.

Profits for H1 2025 were SEK 3.94m (approximately $0.4m). The combined positive fixed-income returns for H1 2025 and above-average, long-term timberland returns are expected to continue driving AP3's growth and sustainability efforts in the coming years.

Navigating steadfastly: AP3's half-year financial results hint at its environmental pledges