Finnish earnings-related pension provider, Ilmarinen, has set a goal to become carbon neutral by 2035.

Publishing its Climate Roadmap, the pension provider has detailed its interim targets, actions and tools to reach its net zero carbon goal. Ilmarinen deputy CEO, investments, Mikko Mursula, said: “Climate change related risks are changing the risk-return profile of both individual companies and entire industries. This change is taking place in all markets, which leads to increasing risks but also to new opportunities in Ilmarinen’s portfolio. We must take this into account when investing pension assets in order to also secure future pensions.

“In the big picture, the degree to which we succeed in mitigating climate change also has an impact on the economy and the investment markets. This entails changes in the whole pension system’s operating environment.”

However, the provider stressed that it cannot achieve carbon neutrality alone and other investors and stakeholders need to work together to transition to a low-carbon economy.

“Our expectations for the Glasgow Climate Change Conference (COP26) are high, as a rapid market transition at scale requires strong government action in terms of regulation and carbon pricing. In addition, further measures are required to foster the transition to a low-carbon economy, such as supporting private sector innovation and creating an enabling environment for consumer demand for climate solutions,” Mursula noted.

Ilmarinen’s roadmap is split into general actions concerning the entire portfolio and into two asset-class-specific roadmaps that cover direct listed equities and Finnish real estate. This includes not investing in companies that are planning new coal investments, setting interim targets of having a carbon footprint of listed equities below 30 per cent by end of 2025, and below 50 per cent by 2030. In addition, its listed equity investments must align with the Paris Agreement’s 2-degree scenario in 2025 and with the 1.5-degree scenario in 2030.

In regard to real estate, it will only use CO2-free electricity in real estate as of 2021 and real estate’s in-use carbon footprint must be below 50 per cent in 2025 and below 80 per cent in 2030 (from the average of 2018–2020). It aims for real estate’s total energy to be CO2-free in 2030.

Ilmarinen head of responsible investments, Karoliina Lindroos, noted that the built environment is responsible for around 40 per cent of all greenhouse gas emissions. The provider is a major property developer in Finland.

“In addition, a wealth of data and analytics is already available for both asset classes, enabling us to set interim targets and measure our progress. Climate data, analytics and the best practices of the industry evolve rapidly. That is why it is paramount for our roadmap to be a living document that allows us to learn more and continuously develop our climate actions as we implement the roadmap. In the upcoming years, we will develop the roadmaps further, adding more asset classes,” Lindroos said.

The roadmap describes, among other things, the gradually tightening criteria used by Ilmarinen to screen and reduce investments that include carbon risk. As real emission reductions cannot be reached through negative screening alone, Ilmarinen also invests in companies in transition that are decarbonising their operations and promotes decarbonisation through stewardship and engagement. Collaboration with other investors also plays a key role.

“The more we investors set aligned targets, the greater the impact on investees. We have joined a number of international commitments and investor initiatives that promote companies’ transition to a low-carbon economy. In practice, the transition means that companies achieve significant cuts in real emissions,” Lindroos explained.

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