Asset Management CultureDecember 16, 2019

Finnish Pension Launches Sustainable ETF with $556 Million

Fund will exclude tobacco, fossil fuel, and weapons investments.

Reported by Michael Katz

Finnish pension fund Varma, asset manager Legal & General Investment Management (LGIM), and index investment company Foxberry have launched an ETF in the US that focuses on sustainable investments. Varma has already invested €500 million ($555.9 million) into the ETF, which was listed on the London Stock Exchange Dec. 10 under the tickers RIUS and RIUG.

“As the responsible investment sector grows, the development of index funds with an increasingly responsible tilt is key,” said Timo Sallinen, Varma’s senior vice president of investments, in a release. “With this product, one of our main goals is to reduce the carbon emission of our investment portfolio.”

The ETF allocates to US equities and takes sustainability criteria into account. Companies that are chosen for investment will be assessed based on how well they take environmental, social, and governance issues into account in their operations.

The fund will exclude tobacco companies and industries that manufacture controversial weapons. It will also shun companies whose operations are based largely on the use of coal and have the highest emissions as well as significant fossil fuel reserves. Companies that have breached international agreements and standards with respect to human rights violations and the use of child labor will not be included.

“Alternatives are needed for exclusion-based products,” said Sallinen. “Many investors on their own may lack the resources to thoroughly look into companies for exclusion purposes.”

Foxberry’s participation includes its Sustainability Consensus Index, which offers exposure to US equities based on an exclusion methodology determined by the firm’s Sustainability Committee. Foxberry said asset owners that have demonstrated enough expertise in sustainability may be invited to join the committee, of which both Legal & General and Varma are members.

Foxberry said its Sustainability Committee can react quickly to market developments and come to a consensus position on responsible investment. The company said the use of the Sustainability Committee is intended to “futureproof” the index by being able to react to emergent issues.