Finnish earnings-related pension provider, Veritas, has reaffirmed that its approach to responsible investing remains unchanged, despite recently adding the defence industry as a separate category in its investment principles.

Veritas portfolio manager, Jussi Häkkinen, emphasised that the company believes in influencing companies through active engagement rather than excluding them.

He added that the provider only considers exclusion as a last resort when active ownership cannot achieve the desired change.

While Veritas has always permitted investments in the defence sector, it updated its principles of responsible investment at the end of last year to explicitly mention the sector, citing changes in Finland's security environment following Russia's “war of aggression”.

"In my opinion, a responsible investor cannot exclude the defence industry from its investment portfolio. The defence industry plays a key role in maintaining security and stability in society. Without the defence industry, we cannot protect societies from external threats if democracy and freedom are attacked,” Häkkinen said.

Veritas clarified that due to the risks associated with the defence industry, it aims to limit its direct investments to companies headquartered in a European Union or North Atlantic Treaty Organisation (NATO) country.

Part of the investment objects' business activities may also be related to controversial weapons, even if the main business is something else, the provider noted.

According to Häkkinen, Veritas' principles of responsible investment guide the monitoring of human rights and norms violations by investees.

“The defence industry is a complex industry, and we are aware that there are risks associated with it,” Häkkinen continued. “These apply to different types of weapons and their possible use in situations where international humanitarian law is violated or where the weapons are used for purposes other than national security and self-defence.”

He added that monitoring the production and supply chains in the sector is “difficult”, but as far as possible, Veritas take these risks into account in its investment activities.

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