Varma developing investment portfolio towards carbon neutrality by 2035

Written by Adam Cadle

22/11/2019

Penson insurance company, Varma, is developing its investment portfolio towards carbon neutrality by 2035 and investing in companies that mitigate the progression of climate change.

In its new Climate Policy for Investments, Varma said that by 2035, one fifth of the investment portfolio will consist of investees that either directly or indirectly mitigate the advancement of climate change. This means focusing on companies and investees that have low emissions, provide solutions for reducing emissions, promote the use of renewable energy or offer carbon sinks.

“Over the past year, it has become clear that emissions must be cut much faster than previously thought in order to keep global warming within the two-degree limit. New information about climate change and its impacts has come to light, which means we must also renew our climate targets,” Varma’s CIO Reima Rytsölä stated.

Varma’s renewed climate targets cover all asset classes. In equities and corporate bonds, the proportion of greenhouse gas emissions in relation to revenue will be cut gradually. The objective is to reduce emissions by 50% by 2027 from the 2016 level.

In industries that are significantly exposed to climate related risks, such as oil & gas, utilities, automobiles, metals & mining, construction materials, transportation and chemicals, Varma focusses its investments on companies that offer alternatives to the use of fossil-based energy and raw materials.

In equity investments, oil exploration will be excluded by 2030, and Varma is committed to exiting from investments in thermal coal even before then, by 2025. Investees can also be placed under enhanced monitoring due to their exposure to climate related risks, in which case Varma will engage with these companies in an effort to accelerate the decommissioning of coal-based operations.

In real estate investments, Varma’s climate goal is to reduce the carbon dioxide emissions of our direct real estate investments by switching to fossil-free heating and electricity by 2030 and 2025 respectively. BREEAM environmental certification will be sought for all of Varma’s significant properties by 2025.

In fund investments, Varma steers away from investees that are exposed to the risks brought by climate change and which generate emissions, and invests in companies that develop solutions to mitigate climate change. In private equity funds, the share of renewables will increase to 50% of electricity generation investments by 2030. In index funds, the share of low-carbon funds will increase to 35% by 2025.

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