We at Elo strongly believe that companies can achieve sustainable results only through sustainable business operations. As a pension investor, we are responsible for significant investment assets and our investment horizon extends decades into the future. We are convinced that a strong approach to the responsibility of our investments plays an essential role in pursuing new investment opportunities and risk management. The purpose of Elo’s investment operations is to ensure the profitable and secure investment of employment pension assets. Our fundamental idea is to operate in different investment markets so as to generate the best possible return on funded pension assets in all market conditions at the selected risk level.
At Elo, responsible investment is guided by the principles of Elo’s strategy and investment plan as well as the principles of responsible investing and ownership policy, approved by the Board of Directors. The environmental responsibility area is supplemented with a separate climate strategy for investments as the challenge posed by climate change to sustainable development has increased in significance in recent years.
Elo has a long tradition of responsible investment. We signed the UN’s Principles for Responsible Investment already in 2007. Responsible investment is an integral part of Elo’s investment operations, and we have integrated ESG matters – that is, issues concerning the environment, social responsibility and good corporate governance – into our investment decisions. We have systematically developed our responsible investment operating methods and will continue determined development work in the future.
In the principles of responsible investing that we published this week, we are increasing the focus of Elo’s strategy of responsible investment and highlighting the significance of engagement as a way for an active owner to make an impact on companies, throughout the ESG framework in general and particularly on risks and possibilities brought by climate change. We have updated our exclusion list with regard to coal and, in the future, we will exclude companies that generate more than 25% of their net sales from business concerning coal production or the use of coal in energy production and have no clear strategy to reduce coal use. We will also take a stance on companies that are under ESG monitoring.
As an investor we have a possibility to engage with our investments through active ownership and dialogue. If the company doesn’t meet Elo’s responsibility principles, Elo aims to make the company rectify the shortcomings in its operations. We may also disinvest due to shortcomings observed in responsibility if the company fails to propose credible measures to rectify the shortcomings.
The significance of engagement as a tool for a responsible and active shareholder is growing, and we are continuously directing more effort into it. Engagement is also the only way of having an impact on reducing the systemic risk of the financial market caused by climate change. We prefer engagement projects involving a significant number of other investors, as engaging the investments is commonly more effective this way.
Hanna Hiidenpalo, Elo's Chief Investment Officer