In summer 2015 we removed from our direct equity investments European power companies that generated more than a third of their electricity production with coal.
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Varma invests in a responsible manner
Responsibility is an integral part of our investment operations and ownership practices. In 2015, we looked into the responsibility of our hedge funds and decided to determine the carbon footprint of our investments.
Responsibility has an influence on a company’s value. The modes of influence are diverse, and their importance varies, but charting responsibility issues is part of good investment operations and expertise. Varma’s investment process includes a CSR analysis. We focus on analysing the most important CSR aspects and their impact on investment returns and risks on a longer term.
Responsible investment at Varma
We have published Varma’s Principles for Responsible Investment, which provide general guidelines for responsible investment operations. Varma’s Board of Directors approved the principles in 2014. The practical application of the principles is described in specific policies for different asset classes, which cover five main asset classes:
- equity investments,
- listed corporate bonds,
- real estate and private equity investments and
- hedge funds.
In our investment activities we take into account internationally recognised principles and norms, such as the UN Global Compact initiative for corporate responsibility, OECD guidelines for multinational enterprises and ILO’s labour practices.
For ethical reasons, Varma excludes companies that focus on the manufacture of tobacco and nuclear weapons from its direct investments.
Promoting responsible hedge funds
In 2015 Varma continued to survey and promote the responsibility of hedge funds. We carried out an extensive CSR survey on hedge funds. The main themes were, among others, the fund management company’s and fund’s governance practices and the application of responsible investment principles in the selection of the funds’ investment objects. The survey also looked into hedge funds’ special features with regard to our policies concerning, for example, high frequency trading and the short selling of borrowed shares.
The CSR survey was a natural step following the publication of our responsible investment policies for hedge fund investments in 2014. In future, the survey will be used to assist in the selection of new funds. Varma encourages fund management companies in particular to create their own principles for responsible investment, to apply them appropriately to the fund’s investment strategy and to report on their activities.
Varma is a member of the Investor Chapter of the Hedge Fund Standards Board (HFSB). The HFSB is an initiative that is aimed at creating standards of good governance, transparency and ownership practices for the hedge fund industry. The role of the members of the Investor Chapter is to encourage hedge funds to adopt the standards and to use the criteria in their own investment processes.
Aiming to mitigate climate change
Mitigating climate change is one of the goals of Varma’s CSR activities. This goal is also evident in our investment operations. In summer 2015 we removed from our direct equity investments European power companies that generated more than a third of their electricity production with coal. We also looked into best practices related to low carbon investment. The goal is to look into the carbon footprint of our investment portfolio and draw up a climate policy for investments in 2016. Read more about the targets for our CSR programme in the Responsibility section.
Energy efficiency reduces the carbon footprint of real estate
We have been focussing strongly on reducing the energy consumption of our business premises. Our goal was to reduce energy consumption by 6% from its 2011 level by 2016. We reached that goal ahead of time in summer 2015.
The measures focused on controlling lighting, ventilation and heating, among other things. We implemented more than 400 individual energy-saving measures in around 70 properties owned by us in 2011–2015, generating annual savings of nearly one million euros. This is equal to the annual energy consumption of 700 detached houses heated with electricity.
We reduced the annual carbon footprint of our real estate by 3,000 CO2 tonnes in 2011−2015.
We report on our responsible investment operations
Varma has signed the UN-supported Principles for Responsible Investment (PRI) in 2011. We report annually on our responsible investment operations in accordance with the PRI framework. The survey results will be published in the second quarter on both PRI’s and Varma’s website.
In future, responsible investment aspects will also be discussed in our GRI report, which will be published for 2016.