Sweden’s Pension Funds Face Eye-Watering Losses After Investing Heavily in Net Zero Projects

In a stark warning to global investors chasing the green dream, Sweden’s pension funds are reeling from massive financial setbacks tied to ambitious net-zero initiatives. Once hailed as pioneers in sustainable investing, these funds poured billions into high-risk clean energy ventures, only to watch them crumble amid market realities. This debacle highlights the perils of over-reliance on government subsidies and unproven technologies, leaving retirees to bear the brunt of the fallout.

The Green Gamble: Investments and Catastrophic Losses

Sweden’s state-backed pension system, known for its progressive approach, aggressively allocated capital to net zero projects under the banner of a “green industrial revolution.” Key players include the Andra AP Fonden (AP2) and AMF Pension, which funneled funds into flagship companies like Northvolt, an electric vehicle battery manufacturer, and Stegra (formerly H2 Green Steel), a producer of low-carbon steel.

Northvolt, once a darling of the green tech scene, filed for Chapter 11 bankruptcy protection in November 2025 after struggling with cash shortages, production delays, and fierce competition from Chinese rivals.

AP2 had invested approximately 1.46 billion Swedish kronor (£117.7 million) in the company, much of which is now wiped out.

Similarly, AMF Pension has 1.9 billion kronor (£153 million) at risk across its 2.8% stake in Northvolt, representing a significant hit to its portfolio.

Stegra, focused on green steel production using hydrogen instead of coal, is teetering on the edge with a staggering €975 million (£858 million) funding gap.

AP2’s exposure here stands at 580 million kronor (£46.8 million), compounded by an additional 193 million kronor (£15.6 million) tied up in Al Gore’s Just Climate fund, which has links to Stegra.

These investments, spanning battery manufacturing and green steel industries, were predicated on optimistic assumptions: aggressive EU decarbonization policies, generous subsidies, and booming demand for electric vehicles. None of these materialized as expected, with weakened EV sales and subsidy cuts exacerbating the crisis.

While exact total losses across all Swedish pension funds remain unaggregated in public reports, estimates point to billions in kronor evaporated—described by analysts as “eye-watering” and potentially requiring taxpayer bailouts via Sweden’s national debt office, which guaranteed portions of these ventures.

The lack of returns is glaring: instead of high rewards from a “high-risk, high-reward” strategy, these projects have delivered zero yields and steep write-downs, socializing losses among pension savers while private executives pocketed earlier gains.

Sweden’s centre-right government is now reconsidering the role of pension funds in national development goals, signaling a shift away from such speculative green bets.

A Tale of Two Paths: Booming Traditional Energy Sectors

In sharp contrast, traditional energy sectors—often maligned by net zero advocates—are delivering robust returns for investors in 2025. As AI data centers and industrial onshoring drive unprecedented power demand, oil, natural gas, nuclear, and utilities are surging ahead, underscoring the reliability of established energy sources over unproven green alternatives.

Oil and Natural Gas: Steady Gains Amid Global Demand

Oil prices have stabilized around $65 per barrel for West Texas Intermediate (WTI) crude, following a brief spike in June due to Middle East tensions.

Despite forecasts of potential dips to $53-$56 by the end of 2026, stocks in this space remain attractive. Exxon Mobil Corp. (XOM), a integrated oil giant, is highlighted for its strong balance sheet and upstream production growth.

ConocoPhillips (COP), focused on exploration and production, boasts a market cap of $134 billion and has seen steady appreciation driven by resilient demand.

Natural gas is poised for even stronger growth, fueled by U.S. exports to Europe and Asia amid the shift from Russian supplies.

Energy infrastructure master limited partnerships (MLPs) have outperformed the broader energy sector by 9% since the 2024 U.S. election, offering inflation-hedged income as prices rise.

Enbridge Inc. (ENB), a pipeline operator with a $104 billion market cap, yields nearly 7% and benefits from increased LNG exports.

Nuclear: The Hottest Energy Trade

Nuclear energy stocks have skyrocketed over 50% since early April 2025, outpacing other energy subsectors thanks to policy support and soaring electricity needs from tech giants like Google.

In Q3 2025, large reactors dominated with plant life extensions and deals like Vistra’s 20-year power supply contract from Comanche Peak.

Fuel supply chains strengthened with U.S. DOE pilots, and Morgan Stanley projects up to $2.2 trillion in nuclear value chain investments by 2050—a 46% increase from prior estimates.

Top performers include utilities with nuclear assets, positioning the sector as a clean, reliable powerhouse.

Utilities: Outperforming Expectations

Utilities have emerged as unexpected winners, outperforming traditional oil and gas stocks in 2025 despite a fossil-fuel-friendly policy environment.

Lower interest rates and demand from AI-driven data centers have bolstered the sector, with clean energy incentives providing a buffer. Stocks like NextEra Energy, involved in nuclear extensions, exemplify this resilience.