Finnish earnings-related pension provider, Varma, has announced plans to cut the absolute emissions of its entire €58bn investment portfolio by a quarter by 2025, and half by 2030, compared to end of 2021 levels.

The provider has already reduced the emissions of its investments in recent years, cutting the carbon intensity of listed equity investments by 30 per cent compared to 2016 levels, and the carbon intensity of corporate loan investments by 23 per cent.

Whilst climate change mitigation has been a goal for Varma’s investment activities since 2016, it is one of the first large investors in Finland to set an absolutely emission targets for its entire investment portfolio, with the updated target covering all asset classes, including unlisted investments.

The updated climate policy will also require the provider to tighten its policy on exclusions, with Varma confirming that it will exclude coal-based businesses and projects from its new investments.

However, the provider clarified that coal and oil drilling are not a strategic investment target, holding just 2.6 per cent of its listed shares in investments where more than 5 per cent of its business is based on coal and 0.4 per cent in those whose business is more than 5 per cent based on oil drilling.

Alongside exclusions, the provider will also look to increase its climate-friendly investment portfolio to 25 per cent of its total portfolio by 2025. At the end of 2021, the climate allocation accounted for 18.4 percent of Varma's total investments.

Varma also uses a low-carbon roadmap for energy use in all asset classes, which means that investment in fossil electricity generation will decline, while the share of renewable energy will increase to at least half of electricity generation investment by 2030.

Commenting on the new targets, Varma's Director of Responsibility, Hanna Kaskela, emphasised that "simply reducing carbon intensity is no longer enough", arguing that emissions must also be reduced in absolute terms.

She stated: “All companies and investors need to reduce their emissions significantly in order to stay within the global limit of 1.5 degrees celsius under the Paris Climate Agreement.

"Measures are in a hurry, as the latest World Meteorological Organization (WMO) estimates that there is a 50 per cent chance that the climate will warm by 1.5 degrees by 2026.

"As a responsible investor, we want to support the realization of this goal of limiting global warming.

“We do not make new investments in companies where more than 10 percent of their turnover, production or production capacity is based on coal. Previously, the corresponding figure was 30 percent.

"Investments in such companies can only be made if the companies have scientifically established emission reduction targets that limit global warming to 1.5 degrees.

“We also do not fund coal-based projects, nor do we invest in companies that are planning new coal investments. We are committed to phasing out all coal investments by 2025 and oil drilling by 2030.

“We will announce in the near future our new investments, which are also in line with the Paris Climate Agreement. Concrete efforts to build a carbon-neutral investment portfolio, mitigate and adapt to climate change will continue.”

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