SENNA

Finland's State Pension Fund Scouts Private Equity for Defense Investments

Helsinki - Finland's state pension fund is actively seeking out private equity managers with strong environmental, social, and governance (ESG) policies as it looks to invest in the country's burgeoning defense industry.

"We are expecting some private equity managers to be investing in this area and we have been scanning their ESG policies," said Timo Löyttyniemi, chief executive of the State Pension Fund of Finland (SPFF).

The Nordic country has seen a surge of interest from global investors after its decision to join NATO following Russia's invasion of Ukraine. Defense contractors and suppliers are seen as attractive investment opportunities, but SPFF is taking a discerning approach, focusing on funds with robust sustainability credentials.

"It's crucial that any investments we make align with our responsible investing principles," Löyttyniemi explained. "We want to back managers who can demonstrate a clear commitment to ESG factors, particularly when it comes to sensitive sectors like defense."

Finland's defense budget is expected to grow significantly in the coming years as the country ramps up military spending. Private equity firms are jockeying for position, hoping to secure stakes in the supply chains and technologies that will underpin the country's military modernization.

However, SPFF is taking a selective approach, closely vetting potential partners. "We're not just looking at financial returns, but also the broader impact of these investments," Löyttyniemi said. "Responsible investing is a key part of our mandate, so we have to be confident that any defense-related deals meet our high standards."

The move reflects a broader shift in the investment landscape, with pension funds and other large institutions placing greater emphasis on sustainability factors when deploying capital. As geopolitical tensions rise, defense is a sector that requires particularly rigorous ESG scrutiny.

"Investors are increasingly aware that they have a role to play in shaping more ethical and sustainable industries," said a senior analyst at a leading global asset manager. "SPFF's approach shows how pension funds can use their influence to drive positive change, even in complex sectors like defense."