Friday Funds: AP Pension, PensionDanmark and KLP back renewables infrastructure fund

The latest fund developments in ESG and sustainable finance

Vigeo Eiris and Euronext have partnered on a new index which selects 80 European large cap companies for their combined ESG and energy transition performance. Using Vigeo Eiris data, the Euronext ESG80 selects companies based on an assigned energy transition score, and performs negative screenings including for the 20% lowest-ranking companies in terms of social and governance issues. Euronext has also launched a futures contract based on the new index. 

Finland’s first impact fund for emerging markets, run by the country’s OP Financial Group, has raised €76m in its first round of funding with commitments from domestic investors including Finland’s Church Pension Fund, OP Life Assurance Company Ltd and Finnfund. The OP Finnfund Global Impact Fund I is targeting €100m and aims to finance “substantial positive impacts on, for instance, climate change, food security, gender equality, and the availability of financing”. With a net profit goal of 8-12% (IRR), the fund will make its first investments over the summer, with the second round of funding expected in the autumn. 

Denmark’s AP Pension and PensionDanmark have invested €500m and €335m, respectively, in a new renewable energy infrastructure fund launched by Copenhagen Infrastructure Partners (CIP). Norway’s KLP also committed an undisclosed amount, with the Copenhagen Infrastructure IV fund reaching first close at €1.5bn. CIP, established in 2012 with the help of PensionDanmark, intends to raise €5bn to €7bn of equity to fund up to €14bn worth of investments across North America, Western Europe, and developed Asia-Pacific markets. A final close is expected within the next nine months.

The majority of European sustainable funds have outperformed their traditional peers over the last decade, with lower-cost options tending to have greater chances of success, according to the findings of a new Morningstar report. The paper, titled How Does European Sustainable Funds' Performance Measure Up?, looks at nearly 4,900 funds domiciled in Europe, including 745 sustainable open-end and exchange-traded funds. It found that US sustainable funds had the strongest performance over the last 10 years, with more than seven out of 10 delivering higher returns than their average conventional fund counterpart. 72% of sustainable funds available to investors for more than 10 years have survived, compared with 45.9% of traditional funds.

Zamo Capital, a European specialist investor in impact investment firms, has backed Social and Sustainable Capital (SASC), the housing focused manager founded in 2012 by Bank of America Merrill Lynch and Goldman Sachs veterans Ben Rick and Adam Knight. Zamo said the undisclosed amount of investment would allow SASC to scale its activities and accelerate fundraising for its Social and Sustainable Housing fund. The Fund’s target is to provide homes for 10,000 people who are homeless, or at risk of becoming so, whilst generating attractive returns for investors.

MAPFRE AM, the asset management arm of the Spanish insurer, said its ESG funds have brought in €62m this year despite market volatility. Its MAPFRE Good Governance fund saw 0.99% growth during the first five months of the year, compared with a 9.37% decline of its benchmark Stoxx Global TMI index, the firm said, with its MAPFRE Inclusión Responsable, MAPFRE Capital Responsable, and MAPFRE Compromiso Sanitario funds also beating their benchmarks.

Natixis affiliate Ossiam has listed a Euro-denominated sovereign bond ETF offering systematic carbon footprint reduction on Germany’s Xetra exchange, according to media reports. The Euro Government Bond Reduced Carbon ETF launches with €200m of investor capital. The Luxembourg-domiciled fund has a maximum expense ratio of 0.17% and aims to provide investors exposure to 3-5 year maturity eurozone bonds with 30% average lower carbon emissions than the investment universe.

A new suite of BlackRock ESG ETFs started trading yesterday. The iShares ESG Aware Conservative Allocation ETF, the iShares ESG Aware Moderate Allocation ETF, the iShares ESG Aware Growth Allocation ETF, and the iShares ESG Aware Aggressive Allocation ETF each have an expense ratio of 0.18%. BlackRock has also filed for four funds investing in high ESG performers while also screening for controversial activities such as fossil fuels, palm oil, for-profit prisons and weapons. Two of them – the iShares ESG Advanced MSCI USA ETF (USXF) and the iShares ESG Advanced MSCI EAFE ETF (DMXF) – also launched yesterday.

Frankfurt-based Prime Capital has raised more than €200m from three seed investments on first close of a green energy infrastructure fund. The vehicle focuses on wind energy assets in the Nordic region and aims to secure assets in the later stages of development. The fund is targeting €500m in later closings, with the first investment is scheduled in the near future.