Stockholm (NordSIP) – ‘Actions speak louder than words.’ The well-known saying comes to mind during NordSIP’s discussion with Varma’s Senior Vice-President, Sustainability and Communications Hanna Kaskela. As a member of the €66.7 billion Finnish pension insurer’s Executive Group, Kaskela is at the heart of the organisation’s efforts to provide its members with healthy returns while meeting their sustainability expectations. She believes that investors should be freer to spend less time on environmental, social, and governance (ESG) disclosures or marketing and dedicate more efforts towards concrete action to future-proof their portfolios.
Building sustainability from the ground up
Varma takes a holistic approach to sustainability that incorporates four factors addressing both internal and external challenges, as Kaskela explains: “Our first priority is to safeguard pensions. The second layer involves preparing for the future by investing responsibly, considering all aspects of underlying supply chains. Thirdly, Varma works towards ensuring that the maximum number of people can benefit from a fruitful working life. This work ability programme includes support for corporate clients in preventing and managing work ability risks. Finally, the fourth pillar of our sustainability programme is focused internally, with the aim of having a thriving workforce within Varma.” A core element of the overarching ethos is that sustainability begins at home, setting a standard for business partners and external counterparties to emulate, Kaskela adds.
As a large institutional investor, Varma is in the process of completing its second Corporate Sustainability Reporting Directive (CSRD) report. The organisation has also signed up to the Principles for Responsible Investment (PRI) and many other international sustainability standards and initiatives. Kaskela has noted a distinct shift in investors’ priorities over the past few years: “Although there are many emissions reduction targets in place, the planet continues to warm and there now seems to be a stronger focus on adaptation rather than mitigation measures.” She describes the regulatory environment as quite volatile, while the internal debate over EU sustainability standards rumbles on and many people are also waiting for the outcome of this month’s key COP30 meeting in Brazil.
Focus on the positive change-makers
This year is an interim milestone for certain decarbonisation targets set by Varma. In 2021, the company set itself the target of reducing the investment portfolio’s absolute emissions by 25% by 2025 and 50% by 2030 compared to 2021 levels. At the end of 2024, the absolute emissions were down 52% compared to 2021. Additionally, the goal is to increase the share of companies committed to the Science-Based Targets initiative (SBTi) for indirect greenhouse gas emissions (scope 3) in equity and listed fixed-income investments and real estate funds to 51% by 2027. There was also a commitment to achieving a 25% climate allocation in the investment portfolio. According to Kaskela, their definition of ‘climate allocation’ is quite broad but focuses on companies that have set Science Based Targets (SBTs), companies that offer climate solutions, and investments in global companies with a track record of reducing greenhouse gases and carbon dioxide emissions. “Exclusions are not very beneficial,” she explains, “We prefer to focus on the Delta, the rate of positive change expected from companies’ strategies. Where there is a good standard of governance in place it is generally better to remain invested and work with company management to encourage progress.”
While Varma remains a participant in the collaborative Climate Action 100+ engagement initiative, Kaskela has mixed feelings about its overall impact: “There was a phase during which it was quite effective, but this has diminished especially since the new US administration came in. There has been progress in terms of increased carbon disclosure, but this has not been accompanied by greater capital expenditure on low-carbon technology.” Varma has been making a concerted effort to expand its coverage of Scope 3 emissions across all investee companies. While some US-based firms have been proactive in reporting these, Kaskela expects declining levels of corporate transparency as part of the so-called ‘ESG backlash’ across the Atlantic. In the absence of Scope 3 data Varma uses relevant proxies, but these are fully disclosed in the annual sustainability report, she adds.
In-house management and tight oversight on external partners
Many of Varma’s listed equities and bonds are managed in-house, along with real estate. Kaskela explains that customised internal indices allow for the full integration of their responsible investment policy and ESG risks within passive strategies. Internally managed active strategies focus on best-in-class investment selection and the identification of companies that are on positive sustainability pathways. According to Kaskela, Varma has not had to follow some of its Nordic peers in firing external fund managers due to shifts in sustainability priorities: “As part of our overall philosophy of examining all aspects of our supply chains, we conduct strong due diligence on managers during the selection process and monitor their continued alignment with our responsible investment policy every year.”
Varma has also taken on the challenge of tackling the biodiversity crisis. As Kaskela points out, the multiple metrics involved make it a much harder task than working with greenhouse gas (GHG) emissions or CO2 equivalent measures. Varma’s ‘Biodiversity Roadmap’ began in 2022 with an analysis of the investment portfolio’s nature-related risks and dependencies and aims to establish clear biodiversity-related selection criteria by the end of this year. As part of this work Varma conducted biodiversity surveys on portfolio companies in 2023, 2024 and 2025, which according to Kaskela have already revealed signs of progress, with 6% fewer respondents in the worst ‘no action’ category over the past 12 months. She also highlights water scarcity as a fast-emerging sub-topic within the nature investing theme. Drought-related supply problems in Europe coupled with booming demand from the technology sector will require vast investment over the coming years, Kaskela cautions.
Along with many of its Nordic institutional asset owner peers, Varma has re-evaluated the defence sector from a responsible investing perspective. Certain manufacturers in the sector have been reintegrated provided they are based in NATO countries, Japan, South Korea, Australia, or New Zealand. “There is a bit a Finnish thinking involved,” explains Kaskela, hinting at the nation’s proximity to Russia. She also points out that the defence sector can be hard to define, with companies providing maintenance services or digital infrastructure to the military as part of a broader client-base.
A positive view on the Omnibus proposals
Looking ahead, Kaskela is encouraged by the prospect of the simplified regulations put forward in the EU’s ‘Omnibus’ proposal. While some non-governmental organisations are worried about the dilution of sustainability rules, Kaskela feels it will free up time and resources for genuine positive action, which is the key theme in Varma’s updated 2026-2030 Sustainability Programme published on 29 October 2025. Nevertheless, she acknowledges that she may have a Nordic bias in that respect. Finnish society is characterised by high levels of transparency and trustworthiness, which means institutions like Varma can be expected to carry on fulfilling their sustainable investment programme with less onus on constant regulatory oversight. The simpler rules might not be as appropriate in other jurisdictions, Kaskela concedes.
What does the future hold for sustainable investors? According to a cautiously optimistic Kaskela, it is likely to be characterised by less greenwashing and ‘fancy branding’ efforts from companies and asset owners, with a greater emphasis on concrete action backed up by genuine belief and professionalism. “ESG hasn’t disappeared, but its meaning has changed,” she comments, adding: “As regulation retreats and politics zigzags, one thing is clear: corporate resilience is no longer measured by reports but rather by critical systems.”
Kaskela believes ‘ESG’ is essentially being replaced by four core themes: the first involves defence and cybersecurity, without which there can be no economy, work, or supply chains. In her view, what was once a grey area is now a strategic necessity. The second component is energy independence, transitions, and related technological choices. It is no longer about going ‘green’ but more about lowering costs, achieving greater competitiveness, and especially energy autonomy. The third element concerns data, which Kaskela believes is a now a fundamental part of infrastructure rather than an add-on, with core underlying governance-related challenges relating to data security, artificial intelligence (AI) accountability, ethics, and algorithm design. The final piece is represented by outputs, which Kaskela believes should be demonstrable in terms of improved risk management, greater resilience, value, and workforce capabilities.
