Ilmarinen Mutual Pension Insurance Co., Helsinki, is switching €17 billion($18.4 billion) worth of equity investments to a new climate benchmark index in 2023, according to a news release Feb. 2.
The move follows the investor's efforts to have carbon neutral portfolios by the end of 2035.
"We have long used ESG benchmark indices in equity investments, but they are not enough to steer our portfolio towards carbon neutrality. That's why we need a new solution," Mikko Mursula, deputy CEO, said in the release.
Until now, Ilmarinen used several ESG benchmark indices for its listed equity assets that take into account the environment, social aspects and good governance.
The new index, the MSCI Climate Action index, has more focus on climate performance and removes the climate risks from the value of investments. The index methodology ranks companies in each sector based on the climate mitigation criteria. On this basis, the index selects the top half of companies in each sector.
"We have been involved in developing an index that aims to reduce the risks to the value of investments caused by climate change and to benefit from the opportunities arising from the fight against climate change," Juha Venäläinen, senior portfolio manager, said in the release.
Ilmarinen also introduced an ESG benchmark index for corporate investment-grade bonds.
"In fixed income investments, ESG indices have a shorter history than equity investments. We are actively monitoring the development of the indices and are ready to move to the climate index once a product similar to equity investments has been launched," Kari Eerola, head of fixed income said in the release.
Ilmarinen has €55.8 billion in assets.