Varma says it is changing the way its sustainable equities portfolio invests, bringing the investments of the special fund more in line with United Nations’ Sustainable Development Goals (SDGs) and revealed plans to expand the pool to as much as €1bn in the long term.

The pensions insurer – Finland’s second biggest – said the revamp of the portfolio it set up in 2016 is aimed at aligning it more closely with the firm’s climate targets and promoting selected UN sustainable development goals, including climate action and responsible consumption.

Kaisa Ojainmaa, portfolio manager at Varma, said the first investments in the new version of the sustainable equity portfolio were made in June.

“Currently, the size of the portfolio is €250m and includes investments in 150 companies. The targeted size of the entire portfolio in the long term is €500m to €1bn depending on the market situation,” she said.

Varma declined to tell IPE how much the portfolio had in assets before the revamp currently underway. However, at the end of March 2017, the pension insurance company said in a news release that the sub-fund had assets of around €400m.

Hanna Kaskela, Varma’s director of responsible investment, told IPE that Varma had decided to move ahead with the changes because the investment universe had developed a lot data-wise since the portfolio was set up in 2016.

Themes selected from among the UN’s SDGs for the companies in the portfolio are climate action, responsible consumption and circular economy, renewable energy, equal access to medicines and vaccines also in the emerging markets, research and development work, innovations and building a sustainable infrastructure, Varma said.

It added that the portfolio invested in listed equities which accorded with those themes in Europe, the US and Canada, and Asian developed markets such as Japan and Hong Kong, and in Australia.

Kaskela said that before the revamp, the main guideline for the sustainable equities portfolio had been that it should be in line with Varma’s climate change policy.

“Overall the investment strategy of the portfolio has been to use sustainability to minimise risks regarding portfolio companies, analyse the cost benefits that sustainable business models produce, and find possible business opportunities from which companies could benefit,” she said.

In the course of this summer, Kaskela said Varma had analysed UN SDGs in more depth and selected the goals it wanted to promote with this portfolio.

“Nowadays the sustainable equity portfolio consists of a passive core and actively-managed part,” she said.

Varma said that in the second half of this year, 15–20 companies will be selected for the actively-managed part of the portfolio, with the analysis and selection process already underway.

The passive part of the portfolio tracks its global ESG benchmark as closely as possible, the company said.

In total, Varma’s equity holdings – including listed and unlisted – added up to around €19bn at the end of June this year.

As announced late last year, Varma aims to make its entire €45bn investment portfolio carbon neutral by 2035.

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