"We are developing our portfolio such that our investments will be in line with the 2-degree target. This means that we will focus our investments in the longer term on investees that are low carbon or whose climate strategy aims for a low-carbon society," says Reima Rytsölä, Varma's CIO.
In the shorter term, Varma's goal is to reduce the carbon footprint of its listed equity investments by 25%, that of its listed corporate bond investments by 15%, and that of its real estate investments by 15% by the year 2020.
Mitigating climate change is one of Varma's CSR targets.
"Climate change is one of the most critical factors that investors must prepare for. It will have substantial financial, social and environmental impacts on current and future generations," says Rytsölä.
Dedicated climate change portfolio
Varma is establishing a new portfolio under the theme of climate change. The portfolio will be made up of companies whose operations benefit from climate change mitigation, for instance in technology and renewable energy production. Companies that are prepared to make the move to decarbonize and, in turn, lower-risk operations will also be selected for the portfolio.
"As a major investor, we have the opportunity to influence companies and encourage them to reduce their carbon footprint," Rytsölä points out.
Solar power and environmental certification for real estate investments
Reducing the carbon footprint of buildings demands an improvement in energy efficiency, which is something Varma has done for a long time now, meeting its energy-savings targets ahead of time in the energy efficiency programme for business premises.
Going forward, Varma will additionally reduce its carbon footprint by using renewable sources of energy in its properties. Solar power, for example, is being used in Varma's buildings already this year.
As a general rule, Varma's most important buildings will be certified according to the BREEAM environmental rating system by 2025, targeting a minimum rating of Good or Very Good.
In hedge and private equity funds, Varma's goal is to influence fund managers such that by 2020 more than half of the fund capital has a climate change policy and has climate change integrated into the investment process.
Climate targets based on in-depth analysis
Varma's climate policy targets are based on a broad analysis that began in autumn 2015 to determine how Varma can best contribute to the mitigation of climate change. In connection with the analysis, the carbon footprint of Varma's investments, was calculated, covering 39% of the company's EUR 41.3 billion portfolio.
The results of the calculation reveal that the carbon footprint of Varma's investments is substantially smaller than the benchmark index, which can be partly attributed to the fact that Varma's listed equity investments do not have a lot of weight in carbon-intensive sectors.
For more information, please contact:
Reima Rytsölä, CIO, tel. +358 10 244 3180 or firstname.lastname@varma.fi
Katri Viippola, Senior VP of HR, CSR and Communications, tel. +358 400 129 500 or firstname.lastname@varma.fi
Attachments:
Climate policy for Varma's investments (pdf)
Climate policy presentation material
Carbon footprint of Varma's investments
Varma Mutual Pension Insurance Company is the most solvent earnings-related pension company and largest private investor in Finland. The company is responsible for the statutory earnings-related pension cover of some 860,000 people in the private sector. Premiums written totalled EUR 4.6 billion in 2015 and pension payments stood at EUR 5.2 billion. The company's investment portfolio amounted to EUR 41.1 billion at the end of March 2016.