Finnish mutual-fund pension company Ilmarinen did well in most aspects last year. The return on investments was 11.8 percent, AUM rose to more than EUR 50 billion and solvency was strengthened.
The year-end 2019 report published on Friday reported the best investment result of the last decade, and was accompanied by a strategy to exclusively make carbon-neutral investments by the end of 2035.
"2019 was an excellent year for Ilmarinen. We updated our strategy and renewed our organization," said Ilmarinen’s President and CEO Jouko Pölönen in a press release about the year-end report.
He said that the decade’s best investment return had strengthened the solvency of the company and that a vast improvement in cost-effectiveness will benefit customers.
Of the main asset classes, equity investments, generated the best returns according to the press release. At year-end, they accounted for 47 percent of Ilmarinen’s investment portfolio and their total return was 20.8 (–3.6) percent.
Fixed income investments, i.e. bonds, fixed income funds and other financial market instruments, accounted for 33.7 percent of Ilmarinen’s investment portfolio and their total return was 4.7 (0.0) percent.
Ilmarinen’s annual average return since 1997 has been 5.8 percent, which corresponds to a real return of 4.3 percent.
New carbon-neutral strategy
Ilmarinen's new target of carbon neutral investments by the end of 2035 has been approved by Ilmarinen's Board of Directors and is in line with the official Finnish target, and faster than the EU target.
"A carbon neutral investment portfolio is easiest to obtain by removing the most polluting companies. However, this does not affect actual emissions, especially in the short term. Our goal is to make our investments make real emission reductions, that is to say, reduce emissions as a whole," explained Mikko Mursula, vice President of Investments, in a statement from the company.
Ilmarinen will continue to favor low-carbon companies in its portfolio and will require a shift in its investments towards a lower carbon society. Ilmarinen also expects its investment targets to integrate the Paris Climate Agreement objectives into strategy and reporting.
Ilmarinen's previous climate targets were introduced in 2016 and will remain in force until the end of 2020.
"Climate science and the understanding of the role of investors in combating climate change have changed significantly since the previous principles. None of the goals for 2016 can or should be missed, but the need for new goals was obvious," said Mikko Mursula.