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Friday Funds: ‘$4 out of every $10 of global equity inflows are now in ESG’

The latest developments in ESG-related funds

Flows into ESG-focused equities so far this year are up 135% over the same period in 2020, according to research from Bank of America, which says $62bn has moved into 'ESG' in recent weeks. $4 out of every $10 of 2021's global equities inflows – or 43% – are into 'ESG', says the report, released today. “Across equities and bonds, the 2,500 ESG funds we track have experienced inflows more than double the flows in the same time period last year,” said the bank’s researchers. In addition, 60% of ESG indices have outperformed their conventional peers so far this year. 

PGIM has launched a Global Total Return ESG Bond Fund, driven in part by the potential for government stimulus packages to turn their attention to the ESG credentials of corporate credit. The fund will invest in a mix of investment grade and high yield notes denominated in USD, Euro, Yen or “other developed or emerging markets currencies”. All issuers will be rated using PGIM’s ESG impact rating framework and performance will be benchmarked against the Bloomberg Barclays Global Aggregate Index. Kimberly LaPointe, Head of PGIM Investments’ international business, said: “Coupled with the rising demand, we also see government stimulus packages and regulation focused on ESG”.  

Foresight Capital Management has smashed through the £1bn mark for its three sustainability funds. The UK-based green finance investor said its 2017 UK Infrastructure Income Fund had returned 29.76% since inception and its Global Real Infrastructure Fund has returned 48.43% since its 2019 launch. Its Sustainable Real Estate Fund has raised £20.7m since its launch last summer.

Jupiter Asset Management has committed to net-zero emissions by 2050 across its investments and operations. It will develop a plan by the end of the year to decarbonise its £55.7bn portfolio, including interim targets for 2030. 

BNP Paribas Asset Management has rebranded its Human Development fund as an Inclusive Growth fund and has shifted its investment strategy to invest in companies focused on reducing inequality. The fund will use an in-house methodology which rates stocks out of 100 based on a range of inclusivity criteria. The final score is weighted 65% towards social factors, 20% towards governance and 15% towards environmental.

JP Morgan Asset Management has launched a sustainable version of its Global Income Fund. The new Global Income Sustainable fund will exclude 10 sectors including thermal coal, adult entertainment and nuclear. It is expected that the sustainable and non-sustainable funds will have an overlap of around 30% of holdings.

SEB’s green technology investment arm, Greentech VC, has participated in a €9m private placement from Swedish wave energy developer CorPower Ocean. As part of the deal, Markus Hökfelt, Head of SEB Greentech, will join CorPower’s board. 

The wind investment arm of Greencoat Capital has bought the remaining half of a 72MW UK-based wind farm from Federated Hermes for £48.1m. The investor, which now owns 100% of the asset, has also entered into an agreement to acquire a 49.9% interest in the under-construction 67.2MW Kype Muir Extension wind farm for £51.4m, as well as providing £47m in construction finance. Following a recent share placing, Greencoat will repay £160m of its £400m revolving credit facility.

New York-based Wealthspire Advisors has launched a number tools to help clients align their investments with their values. The tools include customisable investment portfolios and methods to “support multi-generational relationships and encourage conversations around values-based investing with family members”. 

Solactive has partnered with Barclays to launch a new Climate Change Europe BTI Index, tracking European firms with low climate change impacts, and maximising exposure to companies with emission reduction targets. It will only include stocks with low volatility and a track record of growing dividends.

Asset manager Tikehau has raised over €1bn for its T2 energy transition strategy. The strategy has already invested over €440m in SMEs focused on clean energy, energy efficiency and low-carbon mobility. 

Coronation has launched a Sustainable Global Emerging Markets Fund, which will be co-managed by Suhail Suleman and Lisa Haakman and benchmarked against the MSCI Emerging Markets Index.

Conduit has launched an EIS Impact Fund in partnership with Ascension Ventures. The fund will invest in between eight and 10 “seed to Series A investments” across four themes aligned to the SDGs: climate, health & wellbeing, education & financial inclusion and ‘economic opportunity’. The pair aim to raise £3m at first close in April with a hard cap of £5m. The minimum ticket size is £25,000.

Cowen Sustainable Investments has announced the close of its inaugural fund, having raised $919m from institutional investors, sovereign wealth funds and public pension funds. CSI now has over $1.1bn in platform assets. 

The EIRIS Foundation has published a report detailing the responsible investment policies of charity-specific pooled funds in the UK, worth around £19.4bn. The report found that 67% of funds employ negative screens, mainly focused on sin stocks. However, 20% of funds do not have any screening policy at all, and only half of funds have a climate-related exclusion policy.

In 2020, US sustainable equity funds outperformed their traditional peers by 4.3%, according to a report by Morgan Stanely. Sustainable bond funds outperformed their peers by 0.9%, and both bond and equity funds were less volatile than their ‘non-sustainable’ counterparts. Equity funds’ median downside deviation was 3.1% less than traditional funds, while bond funds’ median downside deviation was 0.4% less.