Finnish earnings-related pension provider Varma is ahead of schedule on its climate targets, with climate-friendly investments making up 43.7 per cent of its portfolio, according to its 2025 Responsible Investment Review.

The provider's target is for 50 per cent of its portfolio to be climate-friendly investments by 2027.

The report also highlighted progress in reducing the absolute emissions from its investments, which have fallen by 55 per cent compared to 2021 levels.

Varma’s goal of increasing its climate allocation to 50 per cent by 2027 is reflected in efforts to reduce the carbon intensity of its listed equities and corporate bond investments.

The provider is currently the only Finnish employment pension insurance company with science-based emission reduction targets aligned with the international Science Based Targets initiative (SBTi).

Varma set these targets in 2023 and has also committed to setting a long-term target aligned with the SBTi by July 2027.

"Climate-friendly investments already cover almost 44 per cent of our entire portfolio. At the same time, we have developed the portfolio structure to support the transition to a low-carbon economy,” Varma responsible investment development manager, Vesa Syrjäläinen, said.

"According to our scenario calculations, Varma's portfolio is relatively well protected from climate risks compared to the global market."

Alongside its climate work, Varma has strengthened its focus on promoting biodiversity, as biodiversity loss has emerged as a key environmental theme guiding investments.

In 2025, the provider also updated its responsibility programme for the period 2026-2030.

Under this framework, investment decisions assess not only return expectations but also the responsibility and sustainability of investment targets. This includes measuring environmental impacts, societal and social issues, and good governance.

"Responsible investing is a way for us to secure the long-term return on investments and manage risks in a rapidly changing world," Syrjäläinen added.

One of Varma’s key themes for 2025 was shifting the focus of its investment exclusions more strongly toward engagement with companies.

Syrjäläinen emphasised that “significant” changes are created by influencing and active ownership, which provides Varma with the opportunity to promote responsibility in practice and engage in open dialogue with its investment targets.

The report noted that board elections are an important tool for influencing portfolio companies, with Nomination Board work playing a key role in ensuring good governance.

Last year, Varma participated in the nomination committees of 38 Finnish companies and took part in more than 700 annual general meetings globally, including 103 meetings at Finnish companies and 602 at foreign companies.

The pension provider also engaged directly with eight companies through advocacy processes addressing a range of sustainability issues, including corruption, labour law, business ethics, corporate governance violations, competition law matters, human rights, information security and environmental issues.

The year saw Varma exclude from its direct investments companies that manufacture controversial weapons, such as nuclear weapons, anti-personnel mines, cluster bombs, and chemical and biological weapons, and whose headquarters are not located in NATO countries, IP-4 countries or Switzerland.

Under its environmental policy, Varma also excluded companies whose turnover, production or production capacity is over 5 per cent based on coal or lignite, although an exception may be made for companies that have set science-based targets.

The provider has also excluded companies that are involved in the extraction of fossil fuels.

In addition, Varma updated the principles of responsible investment for the defence industry, enabling profitable and secure investments in new types of business developing around the sector.

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