Nordic investors have selected among their peers Varma’s sustainable equity portfolio as the best achievement in responsible investment of 2016.
The sustainability portfolio, created by Portfolio Manager Hanna Kaskela, is the flagship of Varma’s responsible investments. The sustainable equity portfolio invests in companies that benefit from climate change mitigation.
“It includes companies that have their own clear targets concerning climate change or which do not incur major costs from adapting to climate change. In addition to environmental aspects, the choice of companies is influenced by social responsibility factors and governance,” says Kaskela.
The portfolio’s value is approximately EUR 400 million. At Varma, the responsible investment process is integrated into the management of all investment portfolios, not just the sustainability portfolio.
In the voting, arranged by Institutional Investor magazine, Nordic investors could propose and vote for exemplary performances in responsible investment in 2016 from among their peers. Kaskela’s sustainability portfolio was voted number one in the category Best ESG Programme.
Kaskela has been independently in charge of the sustainability portfolio – from investment decisions to trading – since its inception.
“The guiding principle in building the portfolio has been to abide by our ambitious climate policy. Other than that, I have more or less been given the green light to build the portfolio as I see fit. My investment strategy has focused on analysing which companies are able to gain business advantages through their responsible operations, while also managing risks,” Kaskela explains.
Investors call for responsibility from companies
In September 2016, political events in the United States caused major volatility in the share prices of renewable energy companies, creating, in turn, tense moments for the portfolio manager – or the engine room, as Kaskela calls it.
“We managed to avoid the worst of the political pitfalls, however, and the return on the portfolio has been positive and better than the benchmark since it was launched,” Kaskela points out.
She stresses that taking sustainability into account in investments is first and foremost about risk management and seeking returns.
“A company that takes good care of its commitments, employees and supply chain will succeed better in the long term than one that neglects its responsibilities,” Kaskela says.
The dominant theme for the sustainability portfolio is currently climate change, but according to Kaskela, it is not carved in stone – there is room for changes. Future themes may involve, for example, water supply issues or vehicle electrification.
“In the future, more and more people will be driving electric cars, and that electricity must be produced in one way or another – but not with fossil fuels. Regulation is in a state of flux, and now is an interesting time to analyse who will have stranded assets in their balance sheets and who will benefit,” Kaskela sums up.
Hanna Kaskela, Portfolio Manager, tel. +358 040 584 5045
Leena Rantasalo, Communications Manager, tel. +358 050 300 7980
More information about Institutional Investor magazine's competition.
Varma Mutual Pension Insurance Company is the most solvent earnings-related pension company and largest private investor in Finland. The company is responsible for the statutory earnings-related pension cover of some 870,000 people in the private sector. Premiums written totalled EUR 4.7 billion in 2016 and pension payments stood at EUR 5.3 billion. Varma’s investment portfolio amounted to EUR 42.9 billion at the end of 2016.