Management of financial assets
Holding and managing foreign reserves are among the statutory tasks of the Bank of Finland. The Bank of Finland’s asset performance was favourable in 2021. Investments in equity and real estate saw especially good returns. It was, however, a challenging year for fixed-income investments. In 2021, sustainability became the fourth objective of investment activities, alongside security, liquidity and return. The aim is for a carbon-neutral investment portfolio.
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 Bank of Finland’s financial risks consist of market, credit and liquidity risks. The Bank manages the risks associated with investment activity through diversification and adherence to the risk limits for investments and investment activities.
The Bank of Finland’s capital adequacy is sufficient to cover the risks arising in the performance of its tasks.
Higher returns on the Bank of Finland's financial assets
At the end of 2021, the Bank of Finland’s financial assets amounted to around EUR 11 billion. These consisted of gold holdings, foreign reserves and investments in equities and real estate.
The Bank of Finland’s investments of assets are informed by the investment policy decided annually by the Bank’s Board. More than half the Bank of Finland’s fixed-income portfolios comprise sovereign bonds and central bank deposits.
In addition to its income investments, the Bank of Finland manages a long-term investment portfolio. In 2021, the Bank of Finland’s long-term investment activities consisted of equity and real estate investments, handled indirectly through mutual funds.
Long-term investment activity has a higher expected return and lower liquidity requirement than with other portfolios.
The Bank of Finland's financial assets yielded an overall return of 8.6% or EUR 866 million in 2021 (0.5%, EUR 76 million in 2020).
The Bank of Finland’s objective is a carbon-neutral investment portfolio
Sustainable investment is a key component of the Bank of Finland’s asset management. The Bank of Finland has signed the UN-backed Principles for Responsible Investment (PRI).
In 2021, the Bank of Finland set a carbon-neutral target for its own investments and published the first intermediate targets in its climate roadmap, the purpose of which is to ensure the achievement of long-term goals.
The Bank’s ambitious carbon-neutral objective means that all its investment portfolios, except for gold, must be carbon-neutral by 2050.
In 2021, the Bank also expressed its public support for the international Task Force on Climate-related Financial Disclosures (TCFD), a reporting framework focused on the threats and opportunities associated with climate change.
TCFD recommendations can help companies, investors and financiers to report on their climate risks with reference to jointly approved specifications. The Bank of Finland has publicly pledged to support these recommendations and develop its own reporting system to take them into account.