Finnish pensions insurer Varma says it has built up an equities portfolio designed to benefit from climate change mitigation, and is actively seeking assets to add to it.
Varma, which is the Nordic country’s largest private investor with €42.4bn in assets at the end of September, said it began developing the portfolio in the second half of this year as part of its newly-published climate policy.
The pension provider described the sustainability portfolio as the “flagship” of its responsible investment strategy.
Hanna Kaskela, Varma’s portfolio manager in charge of building the sustainability portfolio, said: “We are allocating to equities in different ways and creating a more transparent role for sustainability.”
While the portfolio contains €300m of investments now, Kaskela said Varma is actively developing and shaping it, and looking for new investment opportunities.
The firm announced at the end of May that it was the country’s first earnings-related pension company to establish such a policy to steer its investments in all asset classes.
According to the policy, the overall portfolio is being developed so that Varma’s investments are in line with the target of limiting global temperature increases to less than 2°C — as agreed at the Paris Climate Change Conference.
In the shorter term, however, its goal is to shrink the carbon footprint of its listed equity investments by 25%, of listed corporate bonds by 15%, and that of real estate investments by 15% — all by 2020.
Kaskela said it is not the case that Varma is now reallocating resources from other asset classes into the new sustainable equities portfolio, but rather that within the overall equities portfolio, the pensions investor is taking sustainability factors — and particularly climate change-related factors — into account in a more focused way.
Kaskela said: “This is not exactly something we started today or this summer, because we have been excluding power companies that generate more than one third of their electricity with coal since early summer 2015.
”But when you have a carbon footprint target, you need to allocate equities differently in order to be open about this, and in order to meet the targets.”
As well as investing in firms that benefit from climate change mitigation, the sustainability portfolio also includes companies that have their own clear targets concerning climate change, or which do not incur major costs from adapting to climate change.
It includes both industrial and consumer companies from a range of industries in developed markets, Kaskela said.
Kaskela said she believed investing in renewable energy is profitable despite fears that Donald Trump’s victory in this month’s US presidential election will set the battle against climate change back.
“Changes in US policy and regulations may slow the progress, but on a global scale I don’t believe that energy investments will change course,” she said.