Sustainability from Investor’s Perspective: Ilmarinen’s Experiences

Sustainability and responsibility are topics that interest investors. We interviewed Niina Arkko, Senior Responsible Investment Specialist at Ilmarinen Mutual Pension Insurance Company on sustainability, sustainable practices, and sustainability reporting. Ilmarinen is Finland’s largest private earnings-related pension insurance company, and at the end of June 2022, the value of its investments was 56.7 billion euros. It is also a shareholder of Scanfil plc, holds 1.7% of the shares.

According to Niina Arkko, investors have arising interest in sustainability and responsibility. Sustainability is an essential factor in every investment decision at Ilmarinen. It is also a business question.

“In our view, companies that focus on ESG are often better risk-adjusted long-term investments”, Niina Arkko explains. “In addition to our high standard in sustainability, all our investments need to meet other investment criteria, for example, concerning return expectations.”

Companies’ sustainability practices and their reporting enables investors and other stakeholders to assess the company and its sustainability better. Niina Arkko reminds that reporting about all sustainability practices – even those that might seem self-evident – is highly recommended:

“In general, Finnish companies have high-quality reporting, but sometimes companies might not report about all their sustainability practices because they find certain topics low risk for them, such as human rights related issues. However, not reporting them might give a wrong impression, or lead to a lower scoring in sustainability data providers’ ratings. We are open to an in-depth discussion with our portfolio companies if they have questions regarding ESG reporting and practices.“

Niina Arkko also encourages companies to focus on different aspects of sustainability.

“At the moment, companies have focused on reporting their C02 emissions. However, there are arising interests in biodiversity and natural capital. Even if they are more difficult to measure, it would be great if more companies would report about these things as well,” Niina Arkko says, and continues “In addition, I would encourage companies to report also about their net impacts.”

At the moment, companies are often reporting only about their emissions even if the investors would be interested in understanding the net impacts of the company. For instance, if company’s products or services help their customers to decrease their emissions, their net impact, i.e. so called handprint, might be positive.

“It would be beneficial to give some data about the positive side as well even if there are no standard handprint methodologies available yet.” Niina Arkko reminds.