Finnish pension fund Ilmarinen continues its run of seed funding sustainable products with a combined $2.9bn “anchor” investment in new BlackRock climate ETFs capturing US and Japanese equities.
The Helsinki-based institutional investor provided a $2.1bn seed for the US-listed iShares Climate Conscious & Transition MSCI USA ETF (USCL) and an $800m seed for the iShares MSCI Japan Climate Action ETF (2250) which is listed on the Tokyo Stock Exchange.
Ilmarinen contributed to the development of the MSCI climate action indices underlying the two strategies, which select the top half of companies in each sector based on climate considerations including current emissions intensity, emissions reduction targets, green business revenue and climate risk management.
The pension fund stated it intends to increase the climate emphasis of its ETF investments, with over 85% of its passive equity portfolio currently in climate-focused strategies.
Juha Venäläinen, senior portfolio manager at Ilmarinen, commented: “The investments may reduce the sensitivity of the passive stock portfolio to the risks resulting from climate change. The business environment will change globally over the next few years and decades due to climate change.
“We believe that companies that reduce the climate impact of their operations or try to benefit more fully than their competitors from the opportunities resulting from the fight against climate change are better investments for long-term investors compared to their peer group.”
Karolina Lindroos, head of responsible investment and sustainability at Ilmarinen, added: “Ilmarinen’s goal is to achieve a carbon-neutral investment portfolio by the end of 2035.
“Climate change risks and opportunities can also be accounted for in index investments. These investments are part of our actions to promote our climate goals.”
A BlackRock spokesperson told ETF Stream many of its clients are looking to mitigate the risk and capture opportunities associated with climate and the transition to a low-carbon economy.
Manuela Sperandeo, global head of sustainable indexing at BlackRock, added: “Clients are becoming more intentional in their climate transition investment ambitions and turning to ETFs to express their unique preferences.”
Ilmarinen’s latest anchor investments follow a $2bn seed investment in the Xtrackers MSCI USA Climate Action Equity ETF (USSC), which it allocated to after exiting its position in the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG).
The shift to USSC came as part of the pension fund’s focus on climate rather than broad ESG investing. The three recent seed investments also show favour for ’40-Act’ rather than UCITS ETFs.
Venäläinen explained: “We prefer ETFs that trade the same hours – or have the same closing time – as the underlying equities.”