Varma increasingly incorporates biodiversity in its sustainability considerations – enhanced due diligence of food and textile industry companies by portfolio managers

Varma’s environmental policy specifies what environmental sustainability means for Varma. Varma’s environmental policy identifies and describes the means by which we manage the environmental risks and opportunities arising from our operations, investees and supply chain. The environmental policy guides all of Varma’s activities.

“Over the next ten years, failure to adapt to climate change and prevent biodiversity loss will be the most significant risks facing our planet. We have been working for years to take climate change into consideration in our investment activities. With our new policy, we also want to cover responsibility aspects related to biodiversity loss in our entire value chain,” says Hanna Kaskela, Senior Vice President of Sustainability and Communications.

In addition to investments, environmental responsibility also covers Varma’s purchases, the most significant of which are related to construction, maintenance of buildings, and IT systems. One example of Varma’s value chain sustainability work is the human rights and environmental responsibility survey conducted in the company’s supply chain last year, assessing the environmental policies of Varma’s supply chain partners.

Textile and food industries under special scrutiny by portfolio managers

The updated environmental policy covers a comprehensive range of sectors exposed to biodiversity loss. The due diligence process applied in investment operations now also includes sectors that have high exposure to biodiversity risks, such as the agricultural, pharmaceutical and personal product industries, manufacturers of packaging materials,   textile and luxury goods industries, and waste management companies.

Investing in sectors covered by the due diligence process requires portfolio managers to exercise particular care and assess sustainability aspects. Other sectors with high environmental risks include the oil and gas industry, electricity and heat production, and the automotive, mining, concrete, construction materials, forestry, transport and chemical industries.

“Environmental responsibility issues cannot be resolved by simply excluding high-risk sectors from the investment portfolio. Diligent portfolio management takes into account sustainability risks, thus also safeguarding better returns. Ownership is also a way to steer the investee to take sustainability better into account in its operations,” Kaskela says.

International initiatives as the starting point for climate targets

Varma’s climate targets are guided by the emission reduction targets set last year in line with the international SBT initiative. Varma’s SBT targets cover the reduction of emissions from the company’s own operations and the emission targets for the investment portfolio. The emissions of investees make up 97 per cent of Varma’s total emissions. The progress of the SBT targets is monitored annually.

“In our new environmental policy, we have set our climate targets in accordance with international harmonised frameworks for investors. Our performance against the targets is monitored by a third party, which is a good thing. By committing to internationally shared targets, we can also promote environmental responsibility with the leverage of joint investor initiatives, which results in a greater impact than working alone,” Kaskela says.

One of the measures carried out by Varma to reach its emission target is the creation of a climate allocation, which includes investees that take the impacts and opportunities of climate change into account in their operations. Varma’s target is for the climate allocation to represent 50 per cent of the investment portfolio by the end of 2027. It currently covers 36.8 per cent, which represents EUR 21.9 billion in investment assets. 

The environmental policy was approved by Varma’s Board of Directors.

Additional information: 
   

Hanna Kaskela, Senior Vice President, Sustainability & Communications, tel. +358 40 584 5045 or hanna.kaskela(at)varma.fi      

Hanna Leskelä, Communications Manager, tel. +358 40 703 5164 or hanna.leskela(at)varma.fi