We require sustainability of our investees. Taking climate change into account and efficiently managing climate risk in investment operations is one of the focal points of our investment activities.
Mandatum’s risk management system plays a key role when managing the company’s uncertainty factors and ensuring that the company has prepared for future threats and opportunities. The risk management system is a combination of systematic methods that include strategies, processes and reporting procedures that are needed to continuously identify, assess, manage, monitor and report risks. Climate risks are identified and assessed together with other risks. It is the risk management functions’ responsibility to maintain the appropriate guideline document of the different stages and the division of roles and responsibilities between different stakeholders.
Climate risks related to investments are assessed as part of the investment analysis together with other risks. Mandatum monitors the investment portfolio’s climate risks using several ESG indicators. Climate risks are managed and mitigated through precise investment selection, by complying with the Responsible Investment Policy and monitoring the sustainability risks of portfolios. ESG aspects are reported on regularly to the Investment Committee and Board of Directors. Mandatum has already had its investment portfolio’s carbon footprint measured for several years. Mandatum manages its customers’ climate risks with the same principles and guidelines as the investments in the company’s own balance sheet.
Climate risks in life insurance operations
Mandatum Life Insurance Company Limited (Mandatum Life) operates in the life insurance sector, which means that the short and long-term impacts of climate risks are expected to affect the company indirectly through capital market volatility and changes in life expectancy and mortality trends. The long-term impacts of climate change are still unknown, however, and they could have more widespread consequences for life insurance operations.
Climate risks in investment operations
Mandatum Asset Management (MAM) manages both Mandatum’s own assets and client assets, both of which are exposed to climate risks. The sustainability risks of Mandatum’s investment portfolio are at a moderate level and especially transition risk, which falls under climate risks, is important for the investment portfolio.
Mandatum aims to be a part of the solution to the climate crisis by thoroughly analysing investment opportunities with a set of climate-focused criteria. In addition to sector-based negative screening, Mandatum focuses on finding companies that, for example, provide technological innovations to mitigate climate change.
Mandatum’s ambition is to reduce exposure to the fossil fuel industry while simultaneously investing in companies that provide energy from renewable resources or that have credible plans to transition from fossil fuels to a more sustainable business model. As part of the evaluation of transition companies, Mandatum assesses, among other things, the companies’ energy mix and proportion of renewables, plans to grow the renewable energy business, and emissions reduction targets.
Integrating the climate transition and climate risks into the investment process is one of the focal areas in the company’s and client assets’ portfolio management. Additionally, wealth management customers are offered special investment solutions that promote a transition to a low-carbon society and reduce the carbon intensity of investments.