Absolutely Sustainable Investing Across Asset Classes with Paris Aligned Benchmarks : An Application to AP2

This manuscript presents a case study of EU Paris Aligned Benchmark (PAB) implementation across different asset classes in a Swedish state pension fund AP2. Three significant contributions are made. First, the manuscript introduces a notion of Absolutely Sustainable Investing based on the EU climate benchmark principles. Second, the AP2 case study details the implementation of PAB principles across a range of asset classes, including developed and emerging market equities and fixed income, as well as Swedish equities, while outlining relevant considerations. Third, the manuscript highlights the inflation adjustment of the GHG emissions intensity as a cornerstone aspect in achieving net zero targets. The AP2 case study outlines data quality and data infrastructure as the two key challenges of PAB implementation. Nonetheless, AP2 express their support for PABs as it is their belief that portfolios can be PAB-aligned without compromising the risk-return profile. The manuscript concludes with a discussion on the GHG-intensity metric as well as suggestions for further research on the enterprise value including cash (EVIC)-inflation adjustment factor