By Hamlin Lovell, NordicInvestor

This interview is part of our upcoming report on ESG in the Nordics

NordicInvestor interviewed Eveliina Leino, who became Sustainability Manager at Veritas Pension Insurance Company in August 2021, having previously been a Corporate Responsibility Specialist and Responsible Investment Specialist at the firm. Veritas manages around EUR 4 billion in fixed income, equities, property, private equity and hedge funds, internally and externally.

ESG Priorities and Coverage: ESG integration addressing data gaps and greenwashing concerns 

Environmental priorities are climate, a target for portfolios to be carbon neutral by 2035 (and by 2030 for real estate) and climate change is part of the broader corporate responsibility goals. Social priorities include UN Global Compact and safety issues. Governance in itself looks for good governance, and this is also the foundation for enabling the E and S goals.

ESG is integrated into all asset classes, but in practice the implementation varies due to data gaps, which are one challenge faced in applying ESG, especially in relation to private equity, private companies issuing loans and bonds, and smaller companies. Scope 3 carbon data is also a challenge.

For hedge funds, governance is already looked at while E and S are in development. “We have started with the Governance in all our investments and it’s part of our fiduciary duty. We see an increasing interest in other areas (E and S) and expect that to evolve in the near future,” says Leino.

Money market instruments are not covered by ESG integration: “in our asset allocation money market instruments are used to provide liquidity for external cash flows and transactions. These are mostly bank accounts and deposits in sustainable Nordic banks,” explains Leino.

 Greenwashing is a challenge for external manager selection. “Every fund claims to very ESG but some are not that ESG,” says Leino.

ESG integration is the dominant approach for Veritas, though some products do have an explicit ESG mandate. Leino estimates that 20% of allocations are in ESG strategies labelled as such.

Data and Reporting: in house analysis is essential to plug gaps and manage subjectivity

Currently most data is externally provided and issue with external data is differences of opinion between service providers. “ESG metrics and scores are not always correlated, and a lot of data is based on estimates,” says Leino. This is partly a function of the underlying companies also providing different types of reporting with different levels of detail. Leino hopes that company reporting on ESG improves, not least because it can be expensive to buy the data.

To deal with inconsistent disclosure and ratings, Veritas is expanding its internal data collection and analysis, particularly for private equity and alternatives.

Exclusions, Benchmarks, Best in Class and Transition: emphasizing transition

The policy on exclusion lists could cause confusion. Veritas is relatively unusual in not publishing an exclusion list, though its norm-based screening (based on the UN Global Compact, OECD and ILO guidelines) does in practice rule out investments in areas such as controversial weapons or tobacco, and it does have some external mandates that apply exclusion lists. On this basis, investors could probably make an educated guess that excluded companies are very likely to be the “usual suspects” that are excluded by other investors.

Veritas is contemplating the use of ESG benchmarks that might also exclude some companies from the index itself. “we still have standard benchmarks in our current investment plan but we are evaluating the possibility to change them to ESG or Paris-Aligned,” says Leino.

As with many asset owners and asset managers in Finland, future transition is the priority.  “We want to emphasise engagement, transition, impact and improvement as primary tools,” says Leino. Divestment is only an option after engagement fails.

Impact and SDGs: thematics pursued but subjectivity concerns around SDGs for investment purposes

At the investment level, one example of impact investing is that Veritas has thematic positive impact strategies such as renewables and wind power.

At firm level, the corporate responsibility program has prioritized some SDGs: good health and well being (3); decent work and economic growth (8); sustainainable cities and communities (11); climate action (13). The SDGs are not yet applied to funds however. “The measuring of SDG impact is evolving and can be defined in different ways. We follow the development of measuring the SDG impact,” says Leino.

Active ownership and engagement: private and public, with companies and asset managers

Veritas’s direct investments are nearly all in Finnish equities, where they engage directly with companies, currently on a private basis.

Outside Finland, they are engaging via organisations such as Climate Action 100 Plus, Carbon Disclosure Project, Unicef and the UN PRI.  Some of these collaborative campaigns are by their nature public.

Veritas also engages with portfolio managers of external funds: “When investing via indirect vehicles such as mutual funds and external mandates the engagement activities are directed to asset managers with other investors. Asset managers report these issues and we evaluate if their activities have been sufficient,” says Leino.

Climate targets and reporting: earlier targets for real estate

Veritas is amongst several Finnish firms that have ambitiously committed their investment portfolios to Finland’s national target of carbon neutrality by 2035 (some other firms are sticking with the Paris Agreement global target of 2050). ”We recognise that it is hard to achieve and need markets to support it. We still think it is achievable, but there are challenges,” says Leino. Interim targets will soon be added. “A roadmap is being added to chart progress to the net zero goal, and engagement could be expanded,” she adds.

Veritas is also defining a more exact carbon neutrality roadmap for listed equities and real estate investments. For real estate the ambition is carbon neutrality by 2030, thanks to energy efficiency initiatives: “Most of the carbon footprint of real estate investments comes from electricity and heating. In recent years we have moved towards renewable energy and heating and that has reduced our carbon footprint by 84% in our direct real estate. There are still things to do towards carbon neutrality but the most of the reduction is already done,” explains Leino.

Veritas is already reporting carbon footprints, carbon intensity, and scenario analysis. Reporting standards include TCFD, PRI and GRI.  Service providers help with the calculations.

More broadly, environmental reporting is something of a moving target.  “On the environmental side we rely on measurements of the relevant metrics in the portfolio level and we are prepared to move our portfolio towards environmental friendly composition. We acknowledge that the relevant metrics and taxonomies might change over time and we are prepared to adjust our policies according to them,” says Leino.

Environmental targets should soon be expanded to include corporate level targets for Veritas itself: “we are also in progress to develop firm level objectives for reducing our carbon footprint as well waste and water efficiency,” says Leino.

EU Sustainable Finance Framework: concerns over clarity, timing, politics, subjectivity

The SFDR technical standards are not crystal clear at this stage. “The EU Sustainable Finance framework will increase transparency, make it easier to choose products and ESG data should improve in response to consumer demand and collaboration between companies, asset managers and regulators. We expect to allocate to article 6, 8 and 9 funds, partly because it may take some time for article 6 funds to move to article 8,” says Leino.

She expects that the taxonomy should create new winners and losers on a five year view, even if it is not clear what effect it may have next year, but the EU rules are not the only framework for measuring transition anyway: “we would happily invest in credible transition strategies that do not perfectly fit into the SFDR or the taxonomy”.

Indeed, the current EU taxonomy is at an early stage and could be completely outside the portfolio of some managers: “The EU taxonomy is very narrow and it’s possible to invest only to the sectors not included to the taxonomy. The taxonomy can be irrelevant if you avoid those sectors in your investment portfolio and that tells us that other ESG measures are also needed”.

The taxonomy is worthwhile but subjective. “we welcome the taxonomy’s ambition to address greenwashing, but the problem is the politics around the taxonomy and the way it screens sectors to define what is green and what is not”.

Therefore, taxonomy reporting is not compulsory: “we are encouraging managers to report according to the taxonomy, but not all of them are doing so yet. It is not a deal breaker at this stage if they do not”.


Whether the EU pushes impact investing into the mainstream really depends on how impact investing is defined. “If it is basically ESG then it could become mainstream quote soon, if it goes well beyond that it may not be for some time. We judge that the SDGs and measurement of impact are at an early stage now,” concludes Leino.