Varma is investing €230m in two of a set of three new climate-tilted corporate bond index funds produced by State Street Global Advisors (SSGA), acting as a seed investor in the product launch.
The Finnish mutual pension insurance company said it was investing €125m in the euro fund and $125m (€102m) in a US fund – which totalled around €230m.
The third of the three trackers SSGA is launching covers the global market.
They are benchmarked to the Bloomberg Barclays US, euro and global corporate bond indices and apply screens and tilts that help mitigate and adapt for climate impact, according to information from SSGA.
Petri Ala-Härkönen, director, FICC, at Varma, said: “Mitigating climate change has been one of the main goals of Varma’s responsible investment for several years now.”
Varma is aiming for a carbon-neutral investment portfolio by 2035.
Ala-Härkönen said the SSGA corporate bond funds aligned well with the pension provider’s climate-related targets.
SSGA’s new sustainable climate bond funds aimed to “significantly reduce investors’ carbon emissions and fossil fuel exposure, and to re-allocate capital to investments which genuinely contribute to climate change mitigation and adaptation, while keeping close to the index returns,” according to Carlo Funk, the firm’s EMEA head of ESG investment strategy.
The funds were aligned with the Paris goals and had 70% lower carbon emissions than the benchmark index at launch, Varma said.
They prioritised investments in green bonds and firms well prepared for the transition to a low-carbon economy, the Finnish company said.
As well as environmental considerations, the funds also minimised social and governance sustainability risks, it said, excluding tobacco firms, those producing controversial weapons and companies violating UN’s principles on human rights and anti-corruption, for example.
“The diverse ESG factors combined with both climate change mitigation and adaptation make these cost-efficient corporate bond index funds very compelling to Varma,” said Ann Brännback, senior portfolio manager at Varma.