Varma came in fifth place in an international comparison by AODP, which assesses the world’s 100 largest global pension funds’ approach to climate related risks and opportunities. In recent years, Varma has been developing the climate friendliness of its investment portfolio.
“At Varma, climate issues are an integral part of the investments’ decision-making process. An excellent ranking in an international comparison shows that we are committed to our goals,” says Varma’s Chief Investment Officer, Reima Rytsölä.
The Asset Owners Disclosure Project (AODP) is an international, independent organisation that assesses the world’s largest institutional investors by their capacity to respond to climate related risks & opportunities. The climate index ranks the world’s 100 largest global pension funds, who disclose information about their financial statements, principles for responsible investment, climate strategy and governance to the AODP.
Varma has substantially reduced the carbon footprint of its investments over the past few years: the carbon footprint of the company’s equity investments, for example, has diminished by 27% in two years. In the long term, Varma’s goal is to align the entire investment portfolio to the Paris agreement. Three years ago, at the Climate Change Conference in Paris, the participating countries agreed on limiting greenhouse gas emissions as a means of keeping global warming below two degrees C.
“Varma has focussed its investments on low-emission industries and reduced its ownership in oil and gas companies. For example, Varma’s holdings in oil stock are negligible,” says Rytsölä.
Withdrawing from investments in coal dependent electricity producers and coal mines
Three years ago, Varma discontinued its direct equity investments in electricity companies that mainly rely on coal for their production. Varma also excludes all coal mining companies from its direct investment universe.
“Varma’s portfolio managers have worked hard to ensure that our investments are in line with the Paris Agreement. This has been done by investing in responsibly operating companies,” explains Director of Responsible Investment Hanna Kaskela.
The emissions of real estate investments have been reduced by improving energy efficiency and switching to renewable energy. For example, solar panels have been installed to some properties owned by Varma. In non-listed companies, the objective is to further reduce Varma’s exposure to fossil fuel companies.
Engaging companies directly through collaborative initiatives
Active engagement has become an increasingly important form of responsible investment, as pension funds aim to promote climate related matters directly in companies. Varma also takes part in international collaborative initiatives in which investors demand that companies bear responsibility for the environment and take climate risks into account in their business.
Implementing the targets of the Paris Agreement also requires that large index funds increase their investments in low-carbon alternatives.
“The better large index funds take climate matters into account, the less demand there will be for investment objects that burden the environment,” says Kaskela.
Reima Rytsölä, CIO, tel. +358 10 244 3180 or firstname.lastname@example.org
Hanna Kaskela, Director of Responsible Investment, tel. +358 40 584 5045 or email@example.com
Katariina Sillander, Sustainability Manager, tel. +358 40 709 9836 or firstname.lastname@example.org