Ownership policy

This ownership policy outlines how we identify ourselves as an owner, what our expectations are and how we exercise our rights conferred by our holdings.

The policy pertains to our publicly listed equity investments and our mutual fund investments in Finland and abroad. With regard to the implementation and supervision of the policy, we focus on companies in which we hold significant voting rights. As concerns our non-listed equity investments, the policy is applied to the extent applicable.

It is our mission as the statutory pension insurer to provide the statutory pension insurance cover and to invest the pension assets seeking the highest return possible, within the confines of an acceptable risk level. This allows us to carry our responsibility as part of the Finnish pension system.

The objective of our investment activities is to secure the long-term financing of the statutory pension system. The good governance of our investment objects serves to secure the return on the investments in the long term, for which reason we strive to impact our investment objects through ownership policy.
Corporate sustainability forms an integral part of our mandate to invest the pension assets ”profitably and securely”. We extensively incorporate sustainability-related considerations, including environmental (E), social (S) and governance (G) perspectives, in all our investment activities. It is our opinion that companies seeking to take account of the possibilities and risks embedded in ESG aspects are better positioned to succeed in adapting their operations to changes in the operating environment.

This policy was adopted by the Board of Directors of the company on 19 December 2023. In accordance with Section 10b of the Act on Earnings-Related Pension Insurance Companies, the board of a pension insurance company shall confirm its policy in terms of how it will exercise its rights as conferred by its holdings. The Board approves the ownership policy on an annual basis.

1. Use of ownership rights in target companies

1.1. Our conduct as an owner

We aspire to be an active owner and implement a long-term investment policy. The factors we monitor in respect of the entities we own include the company’s strategy, its financial performance, the assessment of the risks associated with the company’s operations, along with the capital structure of each company. Alongside financial key figures or evaluations, we also assess the degree of sustainability of the operations of the entities we own.

1.2. Annual General Meetings and the use of voting rights

As an owner, we endeavour to attend all Annual General Meetings of listed companies in Finland in which we have a holding. Outside Finland we usually attend Annual General Meetings usually by proxy. At Annual General Meetings, we principally vote in support of the proposals of the companies’ Boards of Directors, unless there is a justified cause not to.

The Annual General Meeting constitutes the key governing body for ownership-based steering. Thus, we require that the annual general meeting material contains substantiation for, inter alia, proposals concerning incentive schemes, as well as, the grounds for any proposals that deviate from standard Annual General Meeting matters. As stipulated under Section 10 b, Sub-Section 4 of the Act on Earnings-Related Pension Insurance Companies, we publish an annual report concerning the implementation of our ownership policy and of our voting behaviour at the Annual General Meetings of listed companies.

1.2.1. Composition of the Board of Directors

As concerns the composition of the Board of Directors, we consider that diversity in the competences, experience and viewpoints of the Board members is facilitative of the business development and good governance of the company. For the future of the company, it is important for the Board of Directors to possess diverse and substantive areas of competence. Diversity shall be reflected in the composition of the Board of Directors as complementary competencies in addition to the gender and age distribution. We recommend that the Board be comprised of both men and women.

Our determination of the independence of Board members in relation to the company and its major shareholders is based on the recommendation of the Corporate Governance Code in Finland. We recommend that the majority of the Board members be independent from the company. Additionally, we recommend that at least two members who are independent from the company also be independent from the company’s largest shareholders. If the company has an evident principal shareholder, it is advisable for a representative of this shareholder to also act as a member of the Board of Directors.

We recommend that the roles of the Chairman of the Board and the Chief Executive Officer be essentially kept separate.

Members of the Board shall have sufficient time to perform their duties. The assessment of the adequacy of the time available to a member of the Board of Directors is affected, for example, by his or her principal occupation, secondary posts and simultaneous positions on other boards and positions of trust. On the basis of case-specific consideration, we recommend that no member of the Board should have more than five positions total on the Boards of listed companies. Chairmanship is counted as two Board positions.

We consider it important for the operations of the Board of Directors to be evaluated annually, either in the form of self-assessment, through interviews conducted by the nomination committee or with the aid of an external assessor.

1.2.2. Remuneration for the Board and management

The details of the pay and remuneration scheme for the acting management is decided upon by the Board of the company. It falls to the shareholders to assess the scheme as a whole. One prerequisite for assessment is transparent and clear reporting that clarifies the bases for remuneration. The incentive schemes used by the company must be competitive, motivating and sufficiently challenging and must encourage the commitment of the management and personnel in such a way that supports the long-term interests of the company and the owners, while also being reasonable in terms of their overall impact. We recommend that the remuneration systems shall take into appropriate consideration the relevant responsibility and sustainability perspectives in addition to standard financial perspectives.

The grounds for the fees payable to the members of the Board of Directors must be in proportion with the level of demand, responsibility and time requirements of the position in question. When determining the level of remuneration for the members of the Board of Directors, account shall be taken of the situation, nature and extent of the company’s operations, which determine the level of demand of the Board of Directors’ work, the amount of responsibility and the anticipated workload.

We consider it to be a good practice for the members of the Board and acting management of the company to be shareholders of the company.

1.2.3 Changes to the capital structure

We consider it important that the authorisations proposed by the Boards of Directors concerning the issuance of new shares are appropriate with regard for the company’s strategy and life cycle. We recommend that the share issue authorisation used for remuneration should be separate from the general share issue authorisation to enable shareholders to assess the purposes and appropriateness of such authorisations.

As a rule, significant share issue authorisations to be applied for general use shall not include the authorisation for a directed share issue without further specification of the intended use of the directed issue. We recommend that a share issue authorisation should not exceed 10% of the company’s equity capital without justifiable grounds. Furthermore, we recommend that the Annual General Meeting shall decide on the renewal of share issue authorisations annually and that the duration of a share issue authorisation shall not exceed 18 months without a particular reason.

1.2.4. Dividend policy

We recommend that the company adopt a dividend policy confirmed by the Board of Directors and that the company complies with a dividend policy that is active and goal-oriented from the shareholders’ perspective and that secures the company’s solvency.

1.2.5. Selection and remuneration of auditors

We recommend that the auditor be changed at regular intervals. We consider it a good practice for companies to provide detailed reports on fees paid to the auditor for services other than official auditing services.

1.2.6. Corporate social responsibility proposals for Annual General Meetings

We generally respond positively to Annual General Meeting proposals that promote responsibility and sustainability in accordance with the policies of Veritas. We can support, for example, proposals that advance the climate policy of Veritas. If the climate-related strategies proposed to the Annual General Meeting are inadequate or impractical, we can, as deemed appropriate, also vote against such proposals.

1.3. Communications with target companies, other shareholders and stakeholders

We meet with the management of the companies we have an ownership stake in on a regular basis especially in companies where our ownership is significant. In such meetings, we discuss the objectives and challenges of the company. We strive to grasp and assess the operations and management of the company, as well as relay our own expectations as a shareholder.

We can also exert our influence through meeting with companies in order to facilitate the progression of sustainability. In these corporate meetings, we typically address, for instance, responsible business practices and the consideration of climate change.

If necessary, we may also collaborate with other shareholders and pass joint resolutions concerning actions, when we find it expedient to do so. The more shareholders are behind the impacting process, the greater the impact on the decision-making of the target company.

The paramount consideration in investing pension assets lies in the financial responsibility of the pension insurers: ensuring a return on the assets and the secure investment of same plays a crucial part in the longevity of pension security financing. This entails that in case the operations of a company we own continue to be unsatisfactory even after the aforementioned discourse, and in our assessment no further possibilities for leveraging our influence can be identified, we may divest the holding in question.

2. Our expectations as an owner

2.1. Our expectations concerning environmental responsibility

We encourage companies to report on their environmental impacts and to set ambitious targets in an effort to mitigate climate change, reduce environmental hazards and conserve biodiversity.

We monitor the carbon intensity of our investment objects, and our long-term objective is to align our investment portfolio with the Paris Agreement. We aim to reduce the carbon intensity of our portfolio and increase the percentage of low-carbon investment objects in our portfolio.

This is why we encourage companies to report on the carbon intensity and the other climate impacts of their operations. We report on climate risks in accordance with the TCFD (Task Force on Climate-related Financial Disclosures) guidelines and we urge our investment objects to do the same.

2.2. Our expectations concerning social responsibility

We consider that the prerequisite for the longer-term financial success of a company lies in its respect for human rights and the fair and equal treatment of its employees. The promotion of workplace wellbeing constitutes one of the aspects of our activities as a pension insurer.

We require the same from the companies in which we have a holding. In case it is discovered that the company’s operations include, for example, the exploitation of the workforce or other unlawful activities pertaining to the treatment of employees, and in case even after the aforementioned discourse the company’s operations continue to be unsatisfactory, and in our assessment no further possibilities for leveraging our influence can be identified, we may divest the holding in question.

2.3. Our expectations concerning good governance

Any company in which we have a holding must act in the best interests of its shareholders and treat all its shareholders equally. In accordance with the Limited Liability Companies Act, all shares provide equal rights in the company, unless otherwise provided in the Articles of Association. Thus, no personal characteristics, such as experience in the industry, will give added power at the Annual General Meeting, but rather discretionary authority will be divided as specified in the Articles of Association and in accordance with the size of individual shareholdings.

In addition to equality between shareholders, we consider it a priority for our investment objects to commit to good corporate governance practices.

In particular as concerns listed companies, we emphasise compliance with both domestic and international best practices and recommendations. In Finland, this encompasses compliance by listed companies with the Finnish Corporate Governance Code of 2020, issued by the Finnish Securities Market Association. We consider it important that companies are able to provide unequivocal grounds for any derogations from the governance codes. In respect of non-listed companies, we expect such companies to comply with the governance codes to the extent applicable, when possible.We deem that target companies must abide by the procedures of good governance in respect of the operation and election of their governing bodies, as well as profit distribution.

We attach particular significance to the clarity and timeliness of the communication of our target companies, as well as to their candor in matters we, as investors, find relevant. Any company we invest in must act with sufficient transparency in reporting its financial standing, strategy and risks.

Alongside financial reporting, we feel it is important for the target company to also report on its corporate governance, as well as on factors outside of financial information, such as the sustainability risks associated with the company’s operations and the solutions it has adopted in order to manage such risks.

3. Our conduct as an investor (fund investments)

3.1. Choice of fund

In our fund selection process, we endeavour to ascertain that the fund manager and the fund itself meet our requirements as concerns risk-adjusted return, good governance and sustainable operations. As part of such selection process, we converse with the team managing the fund and verify how the fund manager applies sustainability aspects in the investment activities, how sustainability has in actual fact been integrated into the fund process and how the operating principles pertaining thereto have been documented.

3.2. Monitoring

We conduct an ESG survey among our fund managers on an annual basis, converse with the fund manager and carry out analyses of the fund portfolio.

We aim to grasp and assess the operations of both the fund manager and of the fund, as well as to relay our expectations as an investor. Where necessary, we will seek to exert influence through voicing our concerns regarding the investment and allow the fund manager a reasonable time period to effect remedial measures.

We may also collaborate with other investors in the fund and pass joint resolutions concerning actions, where we find it expedient to do so. The more investors are behind the impacting process, the greater the impact on the decision-making of the target fund.

The paramount consideration in investing pension assets lies in the financial responsibility of the pension insurers: ensuring a return on the assets and the secure investment of same plays a crucial part in the longevity of pension security financing. This entails that in case the operations of a fund continue to be unsatisfactory even after the aforementioned discourse, and in our assessment no further possibilities for leveraging our influence can be identified, we may divest the holding in question.

3.3. Our expectations as an investor (fund investments)

3.3.1. Our expectations concerning environmental responsibility

We encourage the fund manager to report on the fund’s environmental impacts.

We report on climate risks in accordance with the TCFD (Task Force on Climate-related Financial Disclosures) guidelines, and we encourage our investment objects to do the same.

We are committed to the UN Principles for Responsible Investment (PRI) and we recommend the same also to all the mutual funds we invest in.

3.3.2. Good corporate governance

For us, our investment objects’ commitment to good corporate governance practices is a priority. Regarding our investments in funds, this pertains to the fund manager’s own administration. We deem that the fund manager must abide by the procedures of good governance in respect of the operation and election of their governing bodies, as well as profit distribution.

The fund and the fund manager must act in the best interests of its investors and treat all its investors equally. As concerns the fund’s underlying investment objects, responsibility for ownership policy lies with the fund manager.

3.3.3. Reporting

We attach particular significance to the clarity and timeliness of the communication and reporting of the fund manager, as well as to their candor in matters we, as investors, find relevant.

4. Membership og the CEO and personnel of Veritas in the governing bodies of other entities or foundations

This section is applicable to memberships in the governing bodies of entities in which Veritas holds an interest. Any other governing body memberships of the CEO and the personnel are subject to separate internal guidelines.

In our decision-making concerning participation in the governing bodies of other companies or entities, we abide by the following procedure:

The Board of Directors resolves on the participation of the CEO and Deputy CEO in the governing bodies or committees of other companies or entities.
The CEO resolves on the participation of other executive team members and other personnel in the governing bodies or committees of other companies or entities, with the exception of real estate entities owned partially or entirely by Veritas, in relation to which the decision is made by the Chief Investment Officer.

As concerns governing body memberships of members of the Board of Directors, board members must also give due consideration to ensuring such governing body membership does not impede their responsibilities as members of the Board of Directors of Veritas, or give rise to any conflicts of interest with respect to their membership on the Board of Directors of Veritas.

With the exclusion of real estate entities partially or entirely owned by Veritas, we generally do not seek for our representatives to gain access to the management of other companies. This principle may be derogated from for justified cause.

The following principles shall be followed in the decision-making concerning the membership of Veritas’ CEO and personnel in the governing bodies of other entities:

In conducting the assessment, we consider the requirements for independence and autonomy applicable to pension insurance companies. Membership in a governing body may only be approved, provided these are not deemed compromised.
Membership in a governing body must not give rise to any conflicts of interest or entail any adverse implications on the decision-making concerning investment activities, or on the relevant individual’s ability to carry out their duties, for instance, on account of disqualification or in terms of time management.

Veritas maintains a list of positions of trust, as stipulated in Section 10 c of the Finnish Act on Statutory Pension Insurance Companies (354/1997). The list of our positions of trust can be found (in Finnish) on our website.