Stockholm (NordSIP) – The Bank of Finland announced intermediate targets to align its investment activities with net-zero CO2 emissions by 2050 at the latest. The decision follows the agreement of a common stance for climate change-related investments with the other European central banks across the Eurosystem, earlier in the year. The Euro-area agreement focused on a common stance for reporting climate risks, calculating the carbon footprint of its own investment assets and publishing calculations on them.
“Work to achieve net-zero must be done now, even though the timetable for the main goal extends further into the future. The intermediate targets will help us reduce transition and tail risks, and we will gain valuable experience from the impact of the intermediate targets,” says Tuomas Välimäki, Member of the Bank of Finland Board responsible for investment activities.
According to the Finnish central bank, 2022 will see the implementation of the following exclusion criteria:
- Corporate loans will not be made to companies whose turnover from thermal coal represents more than 2% of their total turnover. Turnover from oil drilling will be limited to 10%, while turnover from gas production will be limited to 40% and turnover from the energy use of coal will be capped at 5%.
- For equity investments, the goal is to invest “in products or products of asset managers that have a sufficiently extensive and ambitious climate target/impact”. The central bank also mentions a “50% emission reduction target.”
On top of these quantitative measures, the Bank of Finland will also take more qualitative approach regarding its government bond, “government-related” bonds, its real estate and other asset class holdings.
Regarding government bond holdings, the Finnish central bank will seek to “maintain the public debate on climate change, thus encouraging governments to set adequate national determined contributions in line with the Paris Climate Agreement.” Concomitantly, the monetary policymaker will also “encourage government-related issuers to set climate targets for their own investment activities.” Finally, for real estate and other miscellaneous investments, the central bank will focus on “products or products of asset managers that have a sufficiently extensive and ambitious climate target/impact.”
According to the central bank, the next revision to sector-specific restrictions on direct investments will be made during 2022. For the other intermediate targets, revisions will be made during 2025 at the latest. The intermediate targets may be reviewed and amplified much earlier if there are changes in the portfolio structure or the content of the portfolio. The results will be reported as part of the general reporting of investment activities.
“By setting a climate goal and these intermediate targets, we are managing responsibly the central bank’s investment activities. By channelling cash flows to low-carbon projects, we are reducing the climate risks to our investment portfolio and at the same time acting as an example – one of many,” Välimäki concludes.