How Aalto invests responsibly

‘Funds that commit to the principles of responsible investment have access to our investment portfolio. For example, the assessment of environmental impacts should be a natural part of any investment decision,’ says Iivo Paukkeri, Head of Investments at Aalto University. A key responsible-investment measure is carbon intensity. This is calculated as the ratio between a company’s greenhouse gas emissions and its turnover. Aalto’s long-term goal is a carbon-neutral investment portfolio.

The university’s investment team closely monitors the activities and responsible credentials of the funds in Aalto’s portfolio. The team looks at the indicators reported by the funds themselves, as well as ESG (Environmental, Social and Governance) data collected by third parties on carbon intensity and any violations of international norms. Portfolio companies are also screened individually.

‘Our investment activities are transparent, and our administrative operations are organised in accordance with the principles of good governance,’ says Paukkeri. ‘In the future, we will also be communicating and reporting more openly on responsibility and providing information on areas such as the portfolio’s carbon intensity.’

No compromises are made on investment returns

Investment activities must be both profitable and responsible. The objective of Aalto’s investment portfolio is to achieve an annual return of 5–6 percent. In this regard, things have gone well: in 2019 the return was 15.5 percent, and the portfolio also withstood the shocks of 2020 for a total return of 3.7 percent.

In the future, the financial industry will increasingly be focused on how to effectively achieve both profitability and responsibility objectives in managing portfolios. ‘The popularity of responsible investment is growing in global financial markets,’ says Paukkeri. ‘The issue has been highlighted by recent major events and changes, such as the coronavirus pandemic. Also, EU legislation has been introducing more responsibility-related reporting requirements.’

Use of donated funds

Donated funds are used both for the long-term development of the university and for immediate operative needs. If desired, donations can be directed towards a specific field of science or professorship.

‘The return on capitalized funds is used for the university’s long-term development. Only the real annual return is used for teaching and research. This preserves the value of the donations over time,’ explains Aalto University’s CFO, Marianna Bom.

Donations in expendable funds are used for the university’s short-term needs in a manner agreed upon with the donors. Donations in hybrid funds and the return from them are used to finance professorships for a specified longer period of time. Such donations can be used, for example, to establish a 20-year tenure track professorship.  

Aalto is constantly striving to develop different opportunities for donors from a wide range of groups to participate in the development of the university. ‘This year, a new donation option will become available. It will allow alumni to donate to the university on a regular basis, such as once a month,’ says Bom.

Text: Marjukka Puolakka

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