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The real estate portfolio of Mandatum Asset Management (MAM) significantly improved its score in the 2021 GRESB Real Estate Assessment, earning the Green Star designation and Regional Sector Leader recognition for its sustainability efforts. Real estate investors use the international assessment to further develop their ESG performance.

This was the second time that Mandatum participated in the Global Real Estate Sustainability Benchmark (GRESB) Real Estate Assessment. This year, MAM’s score for its direct real estate investments was 84 points out of 100, and MAM placed first among 14 peers in the benchmark. The average peer score was 67 points.

The Regional Sector Leader recognition is granted to organisations that are among the best performers across ESG for a specific real estate sector within their region, and Mandatum received this recognition for the first time this year. Additionally, Mandatum received the Green Star designation, which is granted to real estate investors that receive high scores in both management and performance.

“The excellent score was partly the result of our successful measures to reduce our properties’ energy and water consumption, along with mitigating emissions. One concrete way that we improved our figures was based on the transition to green electricity in our properties,” says Lilli Konttinen, Portfolio Manager at MAM.

GRESB assesses the sustainability of properties in the entire portfolio. The assessment includes an analysis of energy and water consumption, waste volumes, greenhouse gas emissions, risk management, stakeholder engagement as well as ESG reporting, principles and management.

MAM is constantly working towards reducing the climate risks of its investment activities. In the spring of 2021, a climate risk assessment was implemented for MAM’s real estate investments, including a systematic review of current and potential approaches to mitigate risks caused by climate change.

“We have worked harder than ever to achieve sustainable operations. We also received good points for stakeholder engagement, particularly with our tenants. Our tenants are key partners in our sustainability efforts, as emissions are directly related to their use of our properties. As a result, we have prepared a sustainability guide and our lease agreements include a green lease document, which provides guidelines and recommendations for environmental and corporate responsibility,” says Konttinen.

The number of participants in the GRESB assessment has grown each year with a total of 1,520 companies and funds from 66 countries participating in the 2021 Real Estate Assessment.

MAM manages over € 1 billion in real estate assets, including open and closed strategies across Finland and European real estate investments through externally managed funds. Investors in these strategies include both Sampo Group's insurance companies and MAM's clients. The investments are managed by MAM’s team of 20 real estate professionals.

Mandatum Asset Management (MAM) engages in fund business and provides Sampo Group with discretionary and consultative wealth management and asset management services as an asset management company. Mandatum Asset Management manages EUR 24 billion in assets and employs around 120 investment professionals. Mandatum Asset Management belongs to Sampo Group and is a sister company of Mandatum Life Insurance Company Limited.

The main sustainability indicators across operations have been gathered in an interactive sustainability tool on Sampo Group’s website. The tool provides a comprehensive overview of the Group’s performance on these indicators.

Sustainability Key Figures tool

The indicators have been divided into six sections: Employees, Remuneration, Health & Well-Being, Society, Customer Satisfaction, and Climate Change. The data is illustrated in graphs and tables and on both subsidiary and group level and can be exported for further analysis.

In the future, the tool will continue to evolve as data availability improves and new group-level indicators are introduced.

Employees

Sampo Group has developed reporting on group-level HR data during the past years and added new indicators to provide a more comprehensive overview of the Group’s employees. Currently the Group reports, for example, the number of full-time employees (FTE), the years of employment, the gender distribution, the number of full-time and part-time employees, the number of employees on temporary contracts, the number of new hires by age group and gender, and the number of employees covered by collective bargaining agreements.

Remuneration

Regarding remuneration, Sampo Group reports, for example, fixed and variable compensation key figures, average employee remuneration versus Group CEO pay, and remuneration by gender. Sampo Group is committed to gender pay equality, so monitoring related indicators is important to the Group companies.

Health and Well-Being

Absence due to illness and employee turnover are important indicators of the employees’ well-being and the working environment. Skilled and motivated employees are an asset, and the Group companies invest in creating an inspiring working environment and a strong corporate culture that support employee performance and well-being.

Society

Both corporate income tax and total payable and collected taxes are reported in the Society section. The Sampo Group companies are significant and responsible taxpayers, and tax compliance is viewed as an important part of the Group companies’ business and sustainability.

Customer Satisfaction

Systematic measurement of customer satisfaction is used to gauge the customer experience and identify factors that should be improved. The Group companies use the Net Promoter Score (NPS) and Transactional Net Promoter Score (tNPS) to measure customer satisfaction. The NPS is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s products or services to others and the customer’s loyalty to the brand. The tNPS assesses the customer’s opinion on a certain business transaction.

Climate Change

Sampo Group reports the Scope 1, 2 and 3 greenhouse gas emissions of its own operations as well the carbon footprint of direct equity and fixed income investments. Each Group company has its own environmental principles and targets related, for example, to reducing energy consumption, increasing recycling, and working with suppliers and other stakeholders to contribute to the sustainable development of society.

For more information about the indicators, please see Sampo Group’s Corporate Responsibility report.

The tool is provided by Euroland.

If, Sampo plc’s largest subsidiary, has included sustainability principles in its corporate customer selection and risk assessment from 1 June 2021.

The new underwriting standards are based on the UN Global Compact, an international initiative focusing on 10 principles for sustainable business operations. The principles cover the areas of human rights, labor, environment, and anti-corruption.

Integrating the UN Global Compact principles in insurance underwriting is one of the measures If is taking to increase sustainability in its business practices. Sustainability requirements have previously been applied to suppliers through the Supplier Code of Conduct and to If’s investment activities through norms-based research. Now If also expects its corporate clients to comply with the same principles.

Implementation of the New Standards

If has prepared for the implementation of the new standards by establishing assessment teams specialized in environmental, social and governance (ESG) issues and educating employees on the principles of the UN Global Compact, norms-based research, and the new ESG framework.

At If, the principles of the Global Compact have been directly integrated into the underwriting standards and into the existing Customer Due Diligence process for corporate clients. In practice this means that new and existing customers undergo ESG screening based on an internal model. If uses research from an external partner specialized in monitoring ESG compliance to assess how corporate clients respect the UN Global Compact in their operations. The internal ESG assessment teams make decisions about client relationships based on the external partner’s research, as well as other relevant material.

If a corporate client is found to be in breach of the Global Compact principles, If will notify the company and ask them to improve their operations. However, if the company is not willing or able to change its practices, the client relationship can be terminated.

To date, a small number of corporate clients have been notified that their ESG grading is not satisfactory. So far, no client relationships have been terminated due to breaches against the UN Global Compact principles.

More information on sustainability in underwritingMore information about If’s sustainability work in If’s Sustainability Report 2020 (PDF)

The real estate company Mandatum Life Vuokratontit II Oy, which is managed by Sampo plc’s Real Estate Investment unit, owns an unbuilt plot in the middle of the new neighborhood Suurpelto in Espoo, Finland. The active community association Suurpelto-seura wanted to make the surroundings more appealing and asked the real estate company to participate. Initially, the fence was set up for protection and the fence art project started to take shape in 2020 when Suurpelto-seura and representatives from Espoo School of Arts and the City of Espoo started developing the idea and the theme.

In Sampo Group’s real estate investments, improving the urban environment and strengthening the local community are perceived valuable. In addition to building the fence, Mandatum Life Vuokratontit II Oy contributed to the costs of the supplies.

Painting the fence was a community project, which engaged people of different ages and nationalities in the neighborhood. Especially local kindergartens and schools were invited to participate, and adults volunteered through a series of community workshops. The theme for the project was a clean Baltic Sea. One part of the fence is a gallery of images related to the Baltic Sea, the Lukupuro brook, animals and seafaring created by kindergarteners and school children. In their art works the children depicted the impacts of environmental problems on marine life. The part of the fence facing the square was designed by students from Espoo School of Arts. Over 100 children and 40 adults took part in the project.

The project had to be put on hold a few times due to the COVID-19 pandemic, but the fence art project was finally completed in 2021 and celebrated by the community on World Oceans Day on 8 June 2021. The fence is now brightening the main thoroughfare in Suurpelto and brings joy to inhabitants and passers-by.

Mandatum Life Vuokratontit II Oy is Mandatum’s wholly owned subsidiary. Sampo plc’s Real Estate Investment unit is responsible for If, Mandatum, and Sampo plc’s real estate investments. Most of these investments are in Mandatum’s portfolio. In addition to the wholly owned subsidiaries’ real estate investments, Sampo plc’s Real Estate Investment unit is responsible for Mandatum Life Vuokratontit I Ky, SaKa Hallikiinteistöt Ky, and Kaleva Mutual Insurance Company’s real estate investments.

Climate change impacts regions differently, but the consequences are global. Businesses need to adapt to changing requirements and report on their progress. In real estate, focus areas for sustainability are energy efficiency, curbing climate change, water efficiency, recycling, reducing the amount of waste, as well as providing sustainable, healthy, and safe properties for tenants.

Scope and Aim of the Assessment

Sampo plc’s real estate investment unit is responsible for If, Mandatum, and Sampo plc’s real estate investments. Most of these investments are in Mandatum’s portfolio. In addition to the wholly owned subsidiaries’ real estate investments, Sampo plc’s real estate investment unit is responsible for Mandatum Life Vuokratontit I Ky, SaKa Hallikiinteistöt Ky, and Kaleva Mutual Insurance Company’s real estate investments.

Sampo plc conducted a thorough assessment of the impacts of climate change on Mandatum and SaKa Hallikiinteistöt Ky’s real estate investments together with an external service provider. Climate risk is already incorporated into real estate investment decisions and property management, but there was a need for a more systematic approach to assessing climate change related risks and improve reporting on precautionary measures to stakeholders.

The aim of the assessment was to look at different climate change scenarios and to identify short, medium and long-term impacts on real estate investments. The identified risks and opportunities were mirrored against the real estate investment portfolio and their significance to business was assessed both from the perspective of risk management and the estimated financial impact of the risk.

The assessment was based on the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations and technical supplement “The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities”. The scenarios used were the Intergovernmental Panel on Climate Change’s (IPCC) RCP 2.6 and RCP 8.5 pathways, and the International Energy Agency’s (IEA) WEO, SDS, and CPS scenarios. In addition, the CRREM tool was used.

Physical risks

The main acute physical risks identified were extreme weather events such as floods caused by heavy rain, changing winter temperatures leading to heavy snowfall and icy roads, as well as storm winds and heatwaves. Although extreme weather events are likely to increase, the risk on the real estate investment portfolio is expected to be small. In the long-term, the risks need to be monitored and integrated into property management, for example by paying attention to landscaping and storm water drainage in urban areas and ensuring that building structures are wind resistant. Heatwaves increase the need for cooling, which has an impact on operational costs. Energy efficiency must be considered when selecting cooling equipment and solutions.

Chronic physical risks include rising sea levels, rising average temperatures, changes in rainfall, and severe droughts. Precipitation is expected to increase in all scenarios, which causes concern for soil structure and soil-bearing capacity and increase the risk of humidity exposure to facades. Both precipitation and drought may carry a small to medium risk for properties and can have a financial impact in the form of increased maintenance and repair costs and investments in water saving solutions.

Transition Risks

Transition risks occur in the shift to a greener economy. Changes in the regulatory environment pose a medium to large risk and must be monitored closely. Increasing regulation on e.g. recycling, energy efficiency, low carbon, and reporting will impact real estate investments already in the short term. Measures such as strong energy efficiency management, investments in renewable purchased energy, own renewable energy production, energy efficient equipment, and environmentally friendly materials, as well as increasing the number of charging stations for electric vehicles contribute to managing regulatory risk.

Other major transition risks to consider include changes in tenants’ behavior. Digitalization is likely to increase remote working, which will affect the length of leases and thus rental income. This is also an opportunity to re-think office space; create convertible spaces and digital solutions. People’s attitudes towards consumption and the use of natural resources is also changing, which means additional demands on landlords. Sampo plc’s real estate investment unit measures tenant satisfaction every two years and responds to feedback from tenants. Developing the property in cooperation with tenants and organizing charity events creates a sense of community. Green Leases are used to agree on sustainable practices for the property.

Risk Management

It is important to integrate climate-related risks in risk management processes and especially monitor the changing regulatory landscape. Well-managed business operations and continuous monitoring of the business environment help anticipate and adapt to changes.

- This was the first climate-risk assessment performed on real estate investments managed by Sampo plc. We gained valuable insights and plan to conduct assessments regularly in the future says Kim Westberg, Head of Real Estate Investments.