The Bank of Finland has decided on intermediate targets for its own investment activities in order to achieve carbon neutrality. In investment activities, the goal is net-zero by 2050 at the latest and shorter-term targets have now been set to ensure that goal will be achieved. “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.

In the setting of the intermediate targets, their effectiveness from the perspective of climate risks, the special characteristics of each asset class, the availability of information, and the effects on investment objectives were taken into account. A qualitative or quantitative target was set for each asset class. The goal is to set additional quantitative targets as more information becomes available on the results and effects of the first phase.

The intermediate targets will be reviewed and their results reported regularly. The next revision will be made to sector-specific restrictions on direct investments during 2022, for example with regard to Arctic oil drilling and other so-called unconventional forms of fossil fuel production. 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. This year, as part of the Eurosystem, the Bank of Finland has already agreed with other euro area central banks on a common stance for reporting climate risks, to calculate the carbon footprint of its own investment assets and to publish calculations on them

By taking responsibility into account, it is possible to better manage, among other things, risks related to climate change and to meet growing expectations in terms of the impact of the central bank’s own investment activities. The intermediate targets now decided will support the goals set by the Bank of Finland for its investment activities: security, liquidity, return and responsibility. “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,” says Välimäki.  

TABLE: Asset class-specific intermediate climate targets

 

Direct investments

Indirect investments

 

Governments

Government-related

Corporate loans

Equities

Real estate

Other

First-phase intermediate target

Maintain the public debate on climate change, thus encouraging governments to set adequate national determined contributions in line with the Paris Climate Agreement

Encourage government-related issuers to set climate targets for their own investment activities

Sector-specific restrictions on coal, oil and gas*.

 (*Thermal coal: max. 2% of turnover

Energy use of coal: max. 5% of turnover

Oil drilling: max. 10% of turnover

Gas production: max. 40% of turnover

All restrictions will be taken into use during 2022.

Unconventional oil and gas production will be addressed during 2022, when the necessary climate data are available.)

50% emission reduction target

Invest in products or products of asset managers that have a sufficiently extensive and ambitious climate target/impact

Invest in products or products of asset managers that have a sufficiently extensive and ambitious climate target/impact

Invest in products or products of asset managers that have a sufficiently extensive and ambitious climate target/impact

Possible intermediate targets for the next phase

Quantitative target, for example, by changing portfolio weightings

Quantitative target based on the targets set in phase 1

New sector-specific restrictions (new sectors, tightening of current restrictions)

Tightening the emission reduction target

   

Timetable

Next review point, by 2025 at the latest

Next review point, by 2025 at the latest

Next review point, 2022

Next review point, by 2025 at the latest

Next review point, by 2025 at the latest

Next review point, by 2025 at the latest

For additional information, please contact Anna Hyrske, Principal Responsible Investment Specialist, tel. +358 9 183 2070.

Read more:

Press release 14 September 2021: Bank of Finland sets climate target for its investment portfolio – carbon neutrality to be achieved by 2050 at the latest

Responsible investment at the Bank of Finland

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