The biggest of Finland’s mighty pension insurance companies has set a new climate goal for its portfolio, but the Helsinki-based fund is also making it clear it will do more than simply selling off the big polluters to achieve it.
Ilmarinen announced its board of directors has approved the goal of making the firm’s €48bn of investments carbon-neutral by the end of 2035 – a target it said was in line with the Finnish target and clearly faster than the EU’s plan.
Mikko Mursula, the pension provider’s chief investment officer, said: “Our goal is to make our investments make real emission reductions, that is to say, reduce emissions as a whole.”
Ilmarinen would expect entities it invested in to integrate the Paris Climate Agreement objectives into their strategy and reporting, setting science-based targets, the firm said.
“Calculating a carbon neutral investment portfolio is the easiest way to get rid of the most polluting companies,” Mursula said, adding: “However, this has no effect on actual emissions, especially in the short term.”
Ilmarinen said it would continue to favour low-carbon companies in its portfolio and also require a shift in its investments towards a lower carbon society.
As part of its carbon neutrality objective, the pension fund said it did not invest in companies whose carbon intensity – dependence on fossil fuels – was significant and where the company did not have sufficient targets for getting emissions down.
Explaining the way forward, Ilmarinen said that if more than 30% of a company’s business consisted of high-carbon activities, it would only invest on the basis of a more accurate valuation using MSCI’s carbon risk calculation and classification. This limit will then be gradually reduced to 15% by 2025, it said.
Varma, the second largest of the pension insurers by a narrow margin, announced at the end of November that it was renewing its climate targets and aiming for a carbon neutral investment portfolio by 2035.
Last summer, Finland’s government pledged to make the Nordic country carbon neutral by 2035.
Ilmarinen said its previous set of climate targets were introduced in 2016 and would remain in force until the end of this year.
“Climate science and the understanding of the role of investors in combating climate change have changed significantly since the previous principles,” Mursula said.