Varma Mutual Pension Insurance Co., selected State Street Global Advisors to manage a €230 million ($280 million) allocation to European and U.S. corporate bonds with a sustainable focus, a spokeswoman confirmed.
Varma, which has €52.9 billion in assets, seeded the State Street Sustainable Climate Euro Corporate Bond Fund with €125 million and the State Street Sustainable Climate U.S. Corporate Bond Fund with $125 million.
The funds allocate capital to green bonds and bonds of companies that are well prepared for the transition to a low-carbon economy. Bonds of tobacco companies, controversial weapons producers and companies that violate the United Nations' human rights and anti-corruption principles are excluded.
"These index funds gave us the opportunity to increase our climate allocation also in corporate bond investments. The sustainable climate corporate bond funds are well aligned with Varma's climate-related targets. In terms of mitigating climate change, we aim for a carbon-neutral investment portfolio by 2035," Petri Ala-Harkonen, director for fixed-income, currency and commodities at Varma, said in a news release.
Varma's total allocation to corporate bonds was €4.8 billion at the end of the first quarter. Its green bond portfolio, which consists of government and corporate bonds, was about €450 million at the end of 2020.