Management of financial assets
The objectives of the Bank of Finland’s investment activities are security, liquidity and return. Responsibility is an important element in portfolio management: investment decisions rely very much on factors connected with the environment, social responsibility, management practices and risks.
Holding and managing foreign reserves are among the statutory tasks of the Bank of Finland. The Bank also has euro-denominated investments.
In managing its financial assets, the Bank of Finland safeguards the value of the assets and its ability to support the liquidity of the banking system whenever necessary.
The limits set for investment risk ensure prudent management of the Bank’s financial assets.
The Bank of Finland’s capital adequacy is sufficient to cover the risks arising from the performance of its tasks.
The Bank of Finland’s financial assets consist of a wide range of investments
At the end of 2020, the Bank of Finland’s financial assets amounted to around EUR 10 billion. They comprised gold holdings and foreign reserves, euro-denominated fixed income investments and investments in equity and real estate.
As a result of the measures taken due to the COVID-19 pandemic and changes in exchange rates and share prices, the value of the Bank’s financial assets fell by approximately EUR 1 billion during the year.
The Bank of Finland’s fixed-income portfolios are managed in accordance with the investment policy decided by the Bank of Finland Board each year. More than half the Bank of Finland’s fixed-income portfolios comprise sovereign bonds and central bank deposits.
In addition to its fixed income investments, the Bank of Finland manages a long-term investment portfolio, which has lower liquidity requirements and a higher expected return than its other portfolios.
The total return on the Bank’s fixed-income portfolios in 2020 was 0.5%, i.e. EUR 76 million.
The Bank of Finland is actively involved in developing responsible asset management
Responsibility is an inseparable part of asset management at the Bank of Finland.
Put simply, responsible investment means recognising the relevant ESG (Environmental, Social, Governance) factors when taking decisions on investment. Responsibility also plays a part in risk management with investment activities.
The Bank of Finland has signed the UN-backed Principles for Responsible Investment (PRI).
The Bank of Finland’s investments in equity and property are held in funds managed by external fund managers. In 2020, the Bank stepped up the way we monitor factors associated with the responsibility of fund managers using a specially tailored questionnaire.
The Bank of Finland has also carried out its first portfolio carbon footprint calculations and scenario analyses to examine the current situation in the monitoring of responsibility, identify the risks and opportunities associated with climate change and establish new climate targets.
The purpose is to integrate the new climate targets with the Principles for Responsible Investment in 2021.