Varma to blacklist intermediaries that fund fossil-based energy

Written by Michael Griffiths

18/11/2022

Varma has revealed it is starting to monitor more closely the amount of financing that banks acting as its investment brokers provide to companies that rely on coal and oil in their operations.

Through monitoring and possibly negative screening, the Finnish firm’s objective is to persuade banks to stop financing polluting forms of energy.

Brokers are international banks that manage purchases and sales related to Varma’s investments, such as stock trading, based on orders.

Varma sustainability director, Hanna Kaskela, added: “Criticism has come out of the United Nations Climate Change Conference, currently taking place in Egypt, that countries around the world are still pumping more money into fossil energy than combating the climate crisis.

“By curbing the financing of coal power, we aim to increase the attractiveness of climate-friendly forms of energy, such as wind and solar power, compared to fossil-based energy.”

Varma’s intention is that, as a result of this engagement, banks will be more reluctant to grant loans to coal-reliant companies or help them strengthen their financing with new bonds.

Kaskela added: “This new means of engagement is aligned with our Sustainability Programme, and with our climate targets, which were updated in June. We have outlined that in addition to our own climate targets, we will start demanding more ambitious climate actions from our co-operation partners. We are also developing our value chain, meaning we will require sustainability from the partners we buy services from.”

Varma also conformed that its financing will be monitored using an analysis that shows how much a bank receives in commissions for financing fossil-based fuel production and how that share compares to the financing given to other companies.

Development manager, responsible investment, Vesa Syrjäläinen, added: “There is data available in the market that enables us to track the commissions that banks acting as brokers receive from, for instance, financing coal-based business. Companies that significantly fund fossil-fuel production will be placed on an observation list.

“Varma’s portfolio manager is responsible for informing our intermediaries about our climate policy, and if a blacklisted company does not change its ways, we will no longer trade with that party.

“Our goal is to make it more difficult to obtain financing for coal-based power. If other investors were to do the same on a grand scale, banks would be under pressure to change their ways. If financing for fossil-based energy generation becomes more difficult, costs will increase and opening new facilities will becomes less profitable.”

Related Articles