Helsinki-based Varma has invested €300m in Japanese equities via a new exchange-traded fund (ETF) created to its own specifications, providing the Finnish pension insurance company with exposure to low-emission companies, the firm announced this morning.
The €59bn pensions provider said the new ETF (NEXT FUNDS Solactive Japan ESG Core Index) was listed on the Tokyo Stock Exchange on 8 April, and was the largest-ever responsible investment ETF to be listed in Japan.
Timo Sallinen, Varma’s head of listed securities, said: “We wanted to make an ESG investment that takes sustainability aspects into account also in the Japanese market.”
Varma and Ilmarinen, the two largest pension providers in the private sector side of Finland’s earnings-related pension system, have each commissioned several ESG-themed ETFs over the last few years, which they have seeded with their own capital.
Sallinen said the new Japanese ETF was a systematic continuation of Varma’s ESG investments that were tailored to the US, European and emerging markets.
“The number of exchange-traded ESG funds in Japan is still rather low,” he said.
Varma said the ETF is managed by Nomura Asset Management, and that its index had been tailored to its preferences by index provider Solactive.
Sallinen said the fund did not aim to track the broad Japanese market, as it did not nearly cover all industries or companies in the broad indices.
“In this sense, the tailored fund provides more of an active risk to us compared to a traditional broad market benchmark ETF,” he said.
The ETF invested in around 100 large and mid-sized Japanese companies which had been selected according to strict sustainability criteria, with the liquidity of the shares also taken into account, Varma said.
Companies in the fund include pharmaceuticals firm Takeda, heat pump manufacturer Daikin Industries, along with Hitachi, Toyota and Nintendo.
“The investees selected for the fund are in low-emission industries whose growth prospects we believe in also in the long run,” Sallinen said, adding that the most responsible operators in each sector had been chosen.
”One example of an industry whose future prospects we believe in is technology,” he said.
A year ago, Ilmarinen announced it was seeding the new AXA WF US high yield low carbon bonds fund, which focuses on the carbon and water intensity scores of issuers in particular, with €170m of capital.
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