Finland’s Ilmarinen targets sustainable sales growth with new climate policy

Finnish asset owner seeks sales in line with UN Sustainable Development Goals

Finland’s Ilmarinen is to place a greater emphasis on sustainable growth, setting itself a target that 12% of its equity portfolio’s net sales stem from sustainable solutions by 2020.

The revised target, a doubling of the 6% of net sales currently generated by solutions in line with the United Nations’ Sustainable Development Goals, will see the €35.7bn mutual pension insurer seek out a greater number of companies generating a profit from combatting climate change, according to its newly released Climate Policy.

Mikko Mursula, the provider’s CIO, noted that firms offering up solutions to global challenges were likely to benefit from faster growth, therefore presenting themselves as more attractive investments. “We actively seek investees whose business relates, for example, to renewable energy, clean water or improving resource efficiency,” he added.

Other sectors of interest to Ilmarinen include green construction, the policy document added, sitting alongside a targeted cut in its real estate portfolio’s carbon emissions by 20% over 2015 levels within a decade.

Tiina Landau, senior advisor, responsible investment, told Responsible Investor doubling its target for net sales went hand-in-hand with a new screening approach for its equity investments.

“What we have done so far, and this has been the responsibility of portfolio managers, is to look into the companies and identify the opportunities that they see regarding sustainable development and having sales growth above the market,” she said.

“Now we will add the additional layer of analysis that will allow us to screen the companies for the exact percentage of revenues [derived from sustainable operations].”

Ilmarinen said that, to date, the 6% of net sales generated from sustainable solutions placed its portfolio one percentage point above its benchmark index, and that nearly half of those sales stemmed from alternative energy, energy efficiency and green construction.Additionally, the provider has identified forestry as an asset class of use to its climate policy, as the amount of carbon sequestered by the growth of its forestry assets exceeded the carbon footprint of its real estate holdings, and accounted for 20% and 25%, respectively, of its equity and fixed income footprints.

“As part of productive investment operations, our goal is to increase our forest investments and thus simultaneously increase our positive impact on the climate,” the climate policy said.

The publication of Ilmarinen’s climate policy comes weeks after Varma, Finland’s largest pensions mutual with €42bn in assets, said it had created a €300m sustainable equity portfolio of companies benefitting from climate change mitigation.

Elsewhere in the region, Sweden’s AP2 has said that SEK90bn (€9.2bn) of its capital is now managed in line with ESG considerations.

“One reason for making the integration of sustainability a priority in our asset management strategy is the conviction that it generates better long-term returns. Consequently, we have a comprehensive understanding of this area and a large number of staff who are keenly interested in these issues,” said CEO Eva Halvarsson.
During the autumn, ESG factors have gradually been integrated into the Second AP Fund’s in-house developed mathematical model for asset class global equities. The implementation process is scheduled for completion before the end of the year, when ESG considerations will become integral to investment decisions, in conjunction with the other factors on which the model is based.
The next step for the fund is to develop an ESG-weighted index for quantitative equities management. It also plans to “integrate ESG factors in the same way as we now do for equities”.