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. As concerns our non-listed equity investments, the policy is applied to the extent applicable.

This policy was adopted by the Board of Directors of the company on 14 December 2021. Pursuant to Section 10 b of the Finnish Act on Statutory Pension Insurance Companies, the Board of Directors of a pension insurance company must affirm a policy stipulating the manner in which rights conferred by the company’s holdings in other entities are to be exercised. The Board of Directors adopts this policy on an annual basis.

1. Ownership policy as a component of Veritas’ Investment strategy

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

The objective of our investment activities is to secure the long-term financing of the 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 responsibility forms an integral part of our mandate to invest the pension assets ”profitably and securely”. We incorporate corporate responsibility and sustainability considerations in our investment activities extensively, so as to consider environmental (E), societal and social (S) as well as governance (G) aspects. We believe 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.

2. Our conduct as the owner (Direct equity holdings)

  • Our method of monitoring the activities of our target entities and exercising our voting rights and other rights conferred by shares
  • Our method of engaging in discourse with our target entities, other shareholders and stakeholders

We aspire to be an active owner and implement a long-term investment policy. The factors we monitor in respect of our target entities 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 our target companies.
As a point of departure, in our capacity as the owner we attend the annual general meetings of companies listed in Finland. At general meetings, we vote in support of the proposals of the companies’ Boards of Directors, unless there is a justified cause not to.

As stipulated under Section 10 b, Sub-Section 4 of the Finnish Act on Statutory Pension Insurance Companies, we annually publish a report concerning the implementation of our ownership policy and of our voting behaviour at the annual general meetings of companies listed in Finland.

We meet with the management of the Finnish companies we have an ownership stake in on a regular basis. 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 an effort 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 target company 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. Our expectations as an owner (Direct equity holdings)

3.1. 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 report in accordance with the EU Taxonomy.

3.2. Our expectations concerning social responsibility

We consider one of the prerequisites for the longer-term financial success of a company to be 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 exhibit the exploitation of 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.

3.3. Our expectations concerning good governance

3.3.1. Equality of shareholders

Any company in which we have a holding must act in the best interests of its shareholders and treat all its shareholders equally.

3.3.2. Good corporate governance

For us, our investment objects’ commitment to good corporate governance practices is a priority.

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.

3.3.3. Reporting

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.

3.3.4. Other considerations

Annual General Meeting of Shareholders

Since the Annual General Meeting of Shareholders constitutes the fundamental body for ownership-based steering, it is our requirement that the general meeting material contains substantiation for, inter alia, proposals concerning incentive schemes, as well as reasoning for any proposals that deviate from customary annual general meeting matters.

Incentive schemes

Any incentive schemes adopted in the company must be motivating and sufficiently challenging, while supporting the long-term interests of the company and its owners and being reasonable in terms of their overall impact.

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. A focal consideration is that the Board of Directors possesses competence that is pertinent for the future of the company.

Our determination of the independence of the members of the Board of Directors relative to the company and its major shareholders is in Finland based upon the recommendation of the Corporate Governance Code. If the company has an evident principal shareholder, it is advisable for the representative of the principal shareholder to also act as a member of the Board of Directors. In our view, the roles of the Chairman and of the Chief Executive Officer should essentially be separated.

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

4. Our conduct as an investor (Mutual fund investments)

In mutual fund investments, we adopt the following mode of operation:

4.1. 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.

4.2. 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 mutual fund portfolio.

We aim to grasp and assess the operations of both the fund manager and of the mutual 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.

5. Our expectations as an investor (Mutual fund investments)

5.1. Our expectations concerning environmental responsibility

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

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.

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. Furthermore, we urge our investment objects to report in accordance with the EU Taxonomy.

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.

5.2. Our expectations concerning good governance

5.2.1. Equality of investors

The mutual fund and the fund manager must act in the best interests of its investors and treat all its investors equally.

5.2.2. Good governance

For us, our investment objects’ commitment to good corporate governance practices is a priority.

As concerns investments in mutual 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.

As concerns the fund’s underlying investment objects, responsibility for ownership steering lies with the fund manager.

5.2.3. Reporting

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

6. Membership of 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:

1) 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.

2) 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.

List of positions of trust

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).

Positions of trust (in Finnish)