Principles for responsible investment
Sitra signed the principles in autumn 2015. Environmental and social responsibility and good governance help manage investment risks and ensure best possible returns. In practice, the principles for responsible investing mean:
- taking environmental, social and governance (ESG) factors into account in investment analyses and decision-making processes;
- regularly reporting on the organisation’s responsible investment actions and their progress;
- applying ESG factors in ownership practices (active ownership) and promoting the ESG reporting of investees;
- promoting the adoption of the principles for responsible investment in the investment sector and engaging in continuous co-operation with other investors.
Sitra does not exclude any sectors from its investment universe. Investees are expected to comply with not only the law but also, for example, the UN Global Compact principles (human rights, labour, environment, anti-corruption).
Sitra always examines the fund domiciles of the funds considered as potential investments. Sitra will not invest in funds that are domiciled in tax havens. In this policy, a tax haven refers to an offshore financial centre.
Investments of endowment capital in investment funds
Sitra has investments in equity funds, fixed income funds and real estate funds, among other things. Sitra’s ownership in individual companies is indirect, meaning that the investments are managed by external fund managers who carry out individual investment analyses and make investment decisions.
Sitra primarily chooses funds and fund managers that are both successful and responsible partners. All of the current managers of Sitra’s funds have signed the UN-supported Principles for Responsible Investment.
ESG practices are examined thorouhly when selecting new investment funds. Fund managers are required to take the Principles for Responsible Investment into account in their investment strategies, processes and, ultimately, their choices of securities and their engagement and ownership practices. The actions of existing fund managers are evaluated regularly by engaging them in discussions concerning investment practices. As a final means of exercising influence, the decision can be made to redeem investments in a fund.
Investments in venture capital funds
Sitra’s investment activities include also venture capital fund investments aimed at not only achieving financial returns but also supporting the growth of new business activity that promotes sustainable well-being.
When making fund investments, Sitra aims to evaluate the general partners’ opportunities and skills related to incorporating the ESG factors into their investment processes. Partners are requested to describe their responsible investment processes. Signing the PRI is not required, but it is considered as an advantage.
Sitra is also actively involved in establishing practices and models for impact investing in Finland. The goal of SIB funds, for example, is to create new operating models for solving social problems.
Direct investments in companies
Sitra has direct investments in Finnish growth companies that promote people’s health and well-being, expedite the solving of social problems in society, improve material and energy efficiency as well as accelerate the move from non-renewable natural resources to renewables.
The evaluation and monitoring of investees includes not only traditional financial analysis but also an assessment of the impacts of environmental, social and governance factors. Broader analysis leads to an increased understanding of the company’s operations and a greater awareness of the risks associated with investments.
When Sitra is a significant shareholder, it participates in the target company’s operations and development through the work of the Board of Directors in co-operation with the company’s management and other shareholders. Through ownership steering, Sitra promotes the integration of the ESG perspective into the target companies’ activities and commitment to responsible operating methods. Sitra is a long-term investor that typically commits to the ownership and development of its target companies for a period of approximately 4-10 years.
Sitran has not made any new direct investments since 2014.
Decision-making and reporting
Sitra’s Supervisory Board defines the guidelines for Sitra’s investments of endowment capital. The general rules for investment activities, approved by the Supervisory Board, define the decision-making authorisations and reporting obligations of Sitra’s Board of Directors and Vice President, Endowment Capital.
Sitra’s Vice President, Endowment Capital is responsible for managing the endowment capital and investments. Matters related to capital investments are handled by the investment team.
The responsible investment policy is drafted and updated by the Vice President, Endowment Capital and approved by Sitra’s Board of Directors. Every member of Sitra’s personnel who participates in investment activities is responsible for putting the principles into action.
Responsibility-related issues are regularly reviewed in conjunction with the value adjustment of target companies and capital funds. Topical ESG issues are highlighted in these meetings and action can be taken in response to any potential problems. Responsibility issues are also addressed in investment proposals and discussed in fund manager meetings.
As a responsible investor, Sitra emphasises openness and transparency in all of its operations. Sitra publishes its investments in its Annual Report and also reports annually to the PRI regarding its responsible investment practices. Issues related to responsible investment are also communicated internally.
Sitra promotes responsibility
Sitra’s operations are aimed at promoting and achieving sustainable well-being in Finland. This calls for operating in a changing environment with respect for others and an open mind, while being goal-driven and engaging in co-operative renewal.
In its work, Sitra combines environmental, social and economic responsibility and also strives to promote these areas in society through practical projects. The goals include, among other things, social fairness and sustainable solutions that drive the transformation towards a resource-wise and carbon-neutral society.
Sitra promotes responsible investment practices and is an active member in Finland’s Sustainable Investment Forum (Finsif) as well as the Global Impact Investing Network (GIIN). Sitra is involved in developing the venture capital industry through the Finnish Venture Capital Association and Invest in Europe. The initiatives introduced by these organisations are monitored and Sitra’s own initiatives are promoted by being an active member of networks and associations.