Friday Funds: EU’s market regulator finds retail ESG funds are cheaper than non-ESG equivalents

The European Securities and Markets Authority (ESMA) has found that retail ESG equity funds are, on average, cheaper than their non-ESG equivalents. However, its annual report on retail investment products also notes that “the charging of additional fees may be justified” for ESG funds due to the costs of procuring sustainability data and developing in-house expertise. Additionally, products with high ESG ratings were found to have performed better over 2019 compared to lower-rated products, although this was attributed by the regulator to “sectoral factors”.

Flows into ESG funds in March slowed slightly following record highs in December, but were still the third highest level on record at $53bn, according to research by Morgan Stanley. Flows into ESG ETFs fell to $9.8bn. In the first quarter of 2021, $275bn in ESG-labelled debt was issued, with $133bn of issuance in March, of which 84% was green and social bonds.

Impax Asset Management has replaced BNP Paribas Asset Management with Fidante Partners as its distribution partner in Australia and New Zealand. Impax has also announced a new client mandate introduced by BNP Paribas Asset Management Netherlands.

FTSE Russell has launched a climate risk-adjusted government bond index for the inflation-linked market. The index, based on the FTSE World Inflation-Linked Securities Index, weights index components relative to each country’s climate risk performance. The index will tilt towards countries which demonstrate a greater degree of resilience and preparedness for the risks of climate change. 

Infracapital, the infrastructure equity investment arm of M&G, has become the largest shareholder in thermal battery company EnergyNest after signing off on a €110m investment in the firm. 

UK-based impact house Snowball has announced a 50% surge in its assets under management in the first six months of external fundraising. £7.2m was raised from 10 undisclosed investors during the period, growing the fund size to £20m. 

CPR Asset Management has launched two open-ended climate change funds based on CDP scores. The French asset manager will now offer the CPR Invest Climate Action Euro fund, focused on equities, and the CPR Invest Climate Bonds Euro, focused on bonds. Neither strategy will exclude any sectors, instead selecting companies  “committed to limiting their impact on climate change” based on CDP’s ratings. 

Invesco has relaunched its Pan European Structured Equity Fund as a sustainable fund, using ESG metrics and targeted exclusions. The asset manager says the new methodology will result in the exclusion of around 40% of “ESG laggards” from the fund universe.

German ‘robo advisor’ and model portfolio provider Diversifikator has renamed itself Soehnholz ESG. The firm, founded in 2016, has a long-standing emphasis on ESG: of its 17 portfolios, 15 are responsibly-oriented, including five focused on the Sustainable Development Goals. 

The Episcopal Church’s Pension Fund has invested $20m into the Turner Multifamily Impact Fund II. The fund aims to acquire and manage housing which will be rented at affordable prices to residents earning under the median area income. 

Mirova has begun investing under its Althelia Biodiversity Fund Brazil. The sustainable investment arm of Natixis has closed deals with Manioca Comercio de Alimentos da Amazônia, which manufactures food and drink made from sustainably farmed species native to the Amazon, and Horta da Terra, which sells freeze dried food grown using regenerative agriculture systems. The sum of the investments was not disclosed. 

US Solar Fund plans to raise $104.5m in a new share issue, to finance two solar transactions. It is seeking $82.5 to refinance its Heelstone Portfolio, and $22m to acquire a further 25% stake in the 200MW Mount Signal 2 solar facility in California, bringing its total ownership to 50%. The shares will be issued at a price of $1, and applications close at 1pm on the 5th of May.

Global X has released a clean water ETF, tracking the Solactive global clean water industry index. The ETF includes 39 companies which are involved in industrial water treatment, storage and distribution infrastructure, as well as purification. 

Vontobel Asset Management has launched a green bond fund targeting sovereign and corporate paper linked to projects “with a measurable impact in the transition to a low-carbon economy”.