Annual and Sustainability Report: In 2022, we focused on broadly developing our sustainability and securing our solvency

Varma’s Annual and Sustainability Report 2022 has been published. We report on our key operational results and sustainable actions from the perspectives of pension cover, investments and sustainable working life.

“In 2022, we broadly developed the different areas of Varma’s sustainability. At the same time, Russia’s invasion of Ukraine and the consequent events in global politics prompted us to take a closer look at sustainability risks and responsibility related to geographical areas and governments. We established, for example, that we may invest in defence industry companies under certain conditions”, says Sustainability Director Hanna Kaskela.

For Varma, sustainability means first and foremost taking care of pension assets and pension payments, investing responsibly and promoting sustainable working life. The focus areas of our new Sustainability Programme include human rights, biodiversity and the sustainability of the value chain.

Climate change is one of the most significant sustainability risks that investors must prepare for. In 2022, we drew up even more ambitious climate targets for investments by establishing absolute emission targets, extending the targets to cover all asset classes and increasing the proportion of the climate allocation in our portfolio. We also set stricter exclusion criteria for coal and oil exploration investments.

“The biggest success in terms of working towards our climate targets was the increase in the climate allocation. The increase was driven by, among other things, the fact that many of our investees set Science Based Targets,” Kaskela explains.

At the end of 2022, the absolute emissions of our investment portfolio were down 11 per cent compared to 2021. The climate allocation accounted for 24 per cent of this, i.e. EUR 13 billion. Our goal is to cut the entire investment portfolio’s absolute emissions by 25 per cent by 2025 and by 50 per cent by 2030, and to increase the proportion of the climate allocation to 25 per cent by 2025. 

Of Varma’s listed investments, 2 per cent were in coal companies and 0.3 per cent in oil exploration companies at the end of 2022. We are committed to exiting from thermal coal investments by 2025 and from oil exploration by 2030. 

“We have also started to prepare for the exclusion of banks acting as investment intermediaries that fund fossil fuels by monitoring the amount of financing they provide to companies that make use of coal, oil and gas,” Kaskela says.

In 2022, Varma signed the Science Based Targets initiative (SBTi), through which we committed to setting near-term science-based climate targets within the next two years. 

“By committing to the SBT initiative, we want to increase the transparency of our operations and ensure that our climate actions are aligned with global targets, because we expect the same from our investees,” says Kaskela.

We adopted biodiversity loss mitigation as a sustainability guideline alongside climate work. Our new Biodiversity Roadmap sets the framework for responsible investment requirements in an effort to address biodiversity in investment operations.

“Our goal is to ensure that the biodiversity and climate targets carry equal weight in the near future and that together they promote our environmental responsibility,” says Kaskela.

In 2022, we developed the sustainability of the value chain. We carried out an assessment of the human rights risks and impacts of our investments, supply chain and own operations. As regards investments, we focussed on assessing the human rights risks of unlisted funds. The assessment covered 94 per cent of the funds. Based on the assessment, we drew up Principles for Human Rights in which we commit to address human rights violations through comprehensive norm violation monitoring. We also examined, for the first time, the share of suppliers who had committed to or established SBTs in our procurements.

In 2022, we continued to develop the systematic identification and monitoring of sustainability risks, i.e. risks related to the environment, human rights and governance.

The year 2022 was characterised by Russia’s invasion of Ukraine in February, which not only caused human suffering but also had financial impacts. For Varma, this meant that focusing on our core task, securing pensions, was even more important. We succeeded well in this task, and Varma’s solvency remained at a sustainable level throughout the year, despite the challenging investment environment.

Our Annual and Sustainability Report complies with the Global Reporting Initiative (GRI) reporting framework and has been externally assured. The report’s climate change data has been reported according to the Task Force on Climate-Related Financial Disclosures (TCFD) reporting framework.

Annual and Sustainability Report 2022