Friday Funds: BlackRock’s flagship DC strategy adopts formal ESG policy

The latest developments in ESG-related funds: Franklin Templeton launches impact fund; NextEnergy hits 97% of target at second close.

BlackRock’s £9.2 billion ($11.3 billion; €10.7 billion) flagship defined contribution investment strategy has adopted a formal ESG policy. Launched in 1997, LifePath UK is a series of target date funds covering 11 asset classes invested through low-cost, transparent index funds.

The policy will look to achieve an absolute reduction of 50 percent carbon emissions over a 10-year period (starting from 2019, when the strategy first introduced ESG exposure), achieve a lower portfolio carbon emissions intensity, invest a minimum of 80 percent of the assets held in corporate issuers in ESG screened strategies, and invest a minimum of 80 percent of the assets held in sovereign issuers in strategies with an ESG sovereign rating of BB or higher.

Franklin Templeton has launched a multi-sector impact bond fund for European investors. The Multi-Sector Impact Fund, sub-advised by Brandywine Global, is a sub-fund of Irish domiciled Legg Mason Global Funds. The Article 8 fund will be registered for distribution in the UK, Ireland, Germany and Italy, as well as Switzerland, in the coming weeks. It will aim to help the transition to a sustainable and equitable economy by investing in and engaging with fixed-income issuers that have potential to materially improve their environmental and social practices.

NextEnergy Capital (NEC) has announced the second close of its private solar fund on £487 million, 97 percent of its target. NextPower UK ESG reached its first close last August and the company intends to continue to raise capital for the rest of its fundraising period or until it reaches its £1 billion hard-cap. The second close of NPUK ESG is comprised of commitments from Strathclyde Pension Fund, the UK Infrastructure Bank and a Japanese institutional investor.

The two new investors join existing commitments from LGPS Central Limited, Merseyside Pension Fund, Brunel Pension Partnership and a Middle Eastern institutional investor. At hard-cap, the private solar fund will produce enough clean energy to power the equivalent of nearly 500,000 households or offset nearly 200,000 carbon-emitting cars each year. NEC has already acquired its first three utility-scale solar assets, of which two are operational.

Jenson Funding Partners has launched a £60 million net-zero fund aimed at companies developing solutions to make the transition to net zero more accessible. Aurora I will be available to pre-seed up to Series A-stage companies developing net-zero solutions. The B Corp-certified venture capital firm aims to deploy the fund in mid-2023.

The London Stock Exchange has launched the first fund under its new voluntary carbon credits market, which looks to channel capital to green projects and increase transparency. The fund, Foresight Sustainable Forestry, is a UK investment fund that develops commercial forestland. Investors will be able to purchase carbon credits to offset emissions through the new market, as they increase their efforts to reach their net-zero targets. Currently, companies can purchase carbon credits through brokers and private-market intermediaries. However, they often lack transparency over what specific sustainable projects generate the carbon credits, which the LSE will aim to provide.