Increasingly responsible investments by the University of Helsinki – aiming for a carbon-neutral portfolio

Income from investment is used to fund the University’s core operations, teaching and research.

“The University of Helsinki wishes to be at the forefront of sustainable development and responsibility. In terms of investment activities, we aspire to be the leading and most responsible academic investor in Europe,” says Jari Niemelä, rector of the University of Helsinki.

Supporting the achievement of this goal are the Principles of responsible investment activities, approved by the Board of the University in summer 2019. Under the new principles, established practices are brought together while new goals are also added to the mix.

The overall scope of the investment portfolios of the University of Helsinki Group, comprising the University of Helsinki and the University of Helsinki Funds, is approximately €500 million. For the sake of compactness, this article will subsequently refer to the University of Helsinki, although the principles apply to both security portfolios.

Investing in environmentally and socially responsible businesses

The University’s investment activities are founded on the Principles for Responsible Investment (PRI) supported by the United Nations, which pertain to matters related to the environment, society and corporate governance in terms of investments, known as ESG factors. The University is making ESG analysis a part of its investment activities.

“We expect social and environmental responsibility from our investment objects. At the least, this always means compliance with legislation and regulations, but requirements can be added on the basis of ESG analysis,” states Anders Ekholm, the University’s chief investment officer.

Additional goals may be set for investment objects which may concern, for example, carbon emissions, working conditions or tax planning. Particularly in startup investments, the University actively promotes proper governance by acting as a responsible owner.

“Before making an investment decision, we may investigate, for example, how a company takes nature conservation into account in its operations and what actions it is taking to preserve biodiversity. We also encourage businesses to report on the environmental risks associated with their operations and the measures taken to rectify shortcomings,” Ekholm adds.

“After making the decision to invest, we will be monitoring the realisation of responsibility. When necessary, we will initiate dialogue with the companies, in addition to which we may employ our right to vote in their annual general meetings.”

Towards a carbon-neutral investment portfolio

Fossil fuels remain a central part of the economy. At the moment, businesses that produce fossil fuels comprise less than 1% of the University’s investment portfolio. Chief Investment Officer Ekholm notes that, for example, in Sweden where policies concerning fossil fuels may currently be the most ambitious of their kind in the world, the aim is to achieve carbon neutrality by 2045. For its investment activities, the University has set an even more ambitious goal.

“We wish to have a carbon neutral portfolio well before the year 2045,” Ekholm asserts.

“Our goal is to reduce investment in companies that emit carbon dioxide so that the net carbon footprint of our portfolio will diminish at a rate that is faster than the average in the Finnish economy. This makes our goal broader than simply refraining from investing in fossil fuel producers. However, such transition must be controlled and in line with the transformation of economic structures to ensure the achievement of other investment goals.”

Companies must comply with legislation and good practices

The University requires that investment objects respect human rights and not be party to any discrimination based on race, gender or age. Furthermore, businesses are expected to observe the principles related to international labour law.

There are no uniform and binding codes for good governance; rather, businesses establish and implement it on the basis of the principles of self-regulation. These include reward systems for the management as well as corporate tax policies.

“The University expects businesses to fulfil their tax liabilities and refrain from aggressive tax planning,” Ekholm says.

Responsibility extends far into society

At the University of Helsinki, responsible investment is considered a broad and complex issue.

“Each investment decision has an effect on the University, society and the environment. Among other things, investments can help in curbing climate change or make it worse,” Marjo Berglund, chief financial officer of the University of Helsinki, states.

The University also carries a responsibility for its investment activities in terms of its numerous partners, such as donors, alumni, foundations, businesses, the public administration and other universities. These parties consider it important to have a transparent investment process and regular reporting of investments.

“Responsibility is measured in practical actions. To be able to demand the same from others, the University must itself act in a genuinely responsible manner. Responsibility in investment activities originates within the University and is reflected outwards.”

Returns also for future generations

Income from investment is used to fund the University’s core duties, with the aim of distributing approximately 3% of the annual return as well as investing approximately 1% in funds.

“In addition to the income distributed now, we must keep in mind that future generations must also receive investment returns. In other words, we cannot eat into the capital,” Berglund points out.

University investment goals

The primary goal of investment activities at the University of Helsinki is to increase the University’s financial stability and independence. The University conducts long-term and efficient investment activities, bearing responsibility for both its finances and intergenerational fairness.

On 12 June 2019, the Board of the University approved the Principles of responsible investment activities.

Amount and origins of investment assets

The total investment assets of the University of Helsinki Group amount to approximately €500 million, while its real estate holdings are valued at approximately €1 billion. Investment assets denote market-based investments. Investment assets do not include, for example, real estate or owner apartments used for the University’s core duties.

The investment assets of the University of Helsinki consist of the capital accrued in conjunction with the 2010 reform of the Finnish university system and its returns.

The investment assets of the University of Helsinki Funds have accumulated over a long period of time as a result of donations and investment activities.

University reports on its investments

The achievement of responsibility in investment activities is publicly reported in conjunction with the University’s financial statements with the aim of disclosing both individual investments and total costs.