Responsible Investing

VER’s mission, as defined by law, is to invest pension assets prudently and generate returns. Underlying the investment decisions are the returns expected of the Fund and the return potential of the investees, with due regard to the risk levels. VER’s operations are governed by the Principles for Responsible Investing adopted by its Board of Directors and its shareholder control policy that sets out VER’s objectives and business practices, such as exclusion criteria and the exercise of control in VER-owned companies. VER’s principles of responsible investing were last updated in 2022. VER signed the United Nations Principles for Responsible Investment (UNPRI) in 2011.

VER’s investment concept presupposes that sustainable investing reduces the impact of the negative externalities of VER’s investments on the natural and social environment in the long run.


Sustainabiliy management 

VER’s sustainability performance is reported to the Board of Directors on a regular basis, and the management team addresses sustainability issues as appropriate. As far as asset managers are concerned, VER evaluates their performance in complying with the sustainability criteria. Sustainability performance is regularly assessed by the Risk Management Committee and action is taken when necessary.


Sustainability and strategy

VER’s principles of responsible investing apply to direct and fund investments, as appropriate, and the investment decisions are governed by ethical considerations and ESG criteria. With regard to decisions on new investments, compliance with the guiding principles is ensured during the course of preparations. Existing investments are monitored and, if necessary, influence is exercised in the portfolio companies to improve performance. As a last resort, VER may dispose of the investment.

To ensure compliance with VER’s responsible investing principles, ESG criteria are integrated into the decision-making process while certain sectors are completely excluded.  ESG stands for Environment (E), Social (S) and Governance (G). Effective responsible investing calls for the integration of ESG information into the investment processes and decisions. VER is making determined efforts to improve the integration of ESG considerations and related practices both in respect of the assets that VER manages itself and the assets whose management is outsourced.

At VER, the exclusion of specific sectors is based on an ethnical analysis regarding the product and overall performance. VER applies a 10% turnover limit for direct fixed-income and equity investments in the following sectors:

  • Manufacture of tobacco 
  • Manufacture  of controversial weapons
  • Coal mining
  • Use of coal as an energy source

 
Risk management

The long time span of VER’s key mission and the need for future returns require an understanding of the long-term risks and opportunities associated with investment decisions. Hence, VER perceives sustainability as being part of overall risk management. A careful assessment of ESG issues in making investment decisions reduces risks and creates new investment opportunities. In VER's view, managing sustainability risks is of great importance, and VER recognises the impact of climate change on the environment and the economy in the coming decades. Key priorities in VER’s approach are the climate risk and the carbon footprint of its investments, which is specifically monitored by watching the carbon intensity indicator of the portfolio. At the same time, VER monitors its own carbon footprint relative to the benchmark index. VER actively assesses its carbon risk and the measures it calls for.

VER ensures, for its own part, that VER-owned companies are duly prepared for ESG-related risks and opportunities. VER has commissioned third-party service providers to report on the ESG performance of the individual portfolios and any regulatory infractions as well as to carry out screening related to controversial weapons. As the accounting mechanisms for products and services with a positive environmental impact continue to evolve, VER seeks to ensure that quantifiable targets can be set for these investments in the future.


Exercise of influence

VER seeks to influence the performance of portfolio companies through the exercise of shareholder control. For this, VER has prepared a specific policy. VER’s portfolio managers monitor the operations of the portfolio companies and seek to contribute to the attainment of the objectives established for VER-owned companies. VER’s primary tool for exercising influence is to discuss policies with its portfolio companies. VER’s portfolio managers meet members of corporate management regularly and engage in an active dialogue concerning sustainability and other topical issues.


Sustainability objectives

To contribute to the objectives of the Paris Agreement and manage the portfolio’s climate risks, VER has set the following goals:

  • VER seeks to achieve carbon neutrality in the entire portfolio by 2050.
  • The carbon intensity reduction goal for VER’s listed equity portfolio for 2025 is 30% relative to the 2019 level, while the emission reduction goal for 2030 is 50%.
  • With regard to liquid corporate bonds, VER’s goal is to keep the carbon intensity of the portfolio below the benchmark index.

Aside from emissions, VER monitors portfolio performance with regard to the Global Compact principles. The UN Global Compact is the UN’s corporate responsibility initiative to promote and develop the environmental, social and economic sustainability of companies and communities. VER aims to ensure that none of its portfolio companies violate the Global Compact principles.


Carbon footprint of VER's portfolio

Carbon footprint of VER’s portfolio

Allocation

Portfolio's carbon intensity

Portfolio's emissions

Market value of portfolio

%

Coverage (Scope 1 and 2)

Weighted average carbon intensity
(TCFD)
 

Coverage (Scope 1 and 2)

Carbon footprint

Total
carbon emissions
tCO2e

Listed equities

8 612

39,9 %

98,4%

145

97,1%

90

      768 507  

Corporate loans

1 983

9,2 %

71,1%

77

51,8%

77

          64 358  

To reduce the greenhouse gas emissions of its portfolio, VER employs two approaches. VER believes that its portfolio companies will strive to achieve net zero emissions by a given year. Assuming that their objectives are achieved within the foreseen timeframe, it may be expected that the emissions of VER's portfolio will decrease significantly. Additionally, VER focuses on investees that establish more ambitious emission reduction targets and take more determined action than their peers. As a result of this policy, VER will arguably achieve the target level for the entire portfolio more quickly than by relying purely on index-based investing.

VERs Board of Directors has adopted the Principles for Responsible Investing

VER's climate report 2022