Friday funds: German state adds sustainability as fourth investment standard

The latest developments in ESG-related funds: BlackRock launches ESG global allocation fund; ABP acquires 49% stake in US solar project.

The State of Baden-Württemberg has passed a law requiring the integration of sustainability into its €17 billion investment portfolio. Future investments will have to incorporate the SDGs, the EU taxonomy and be aligned with a target of limiting global warming to 1.5C. Sustainability has been added as the fourth investment standard, alongside profitability, liquidity and security. The law will apply to the state’s assets as well as state-owned companies. Finance minister Danyal Bayaz said: “We are sending a clear signal to capital markets and want to create incentives for greater investment in climate protection and sustainability. Because we need these private investments in order to be successful in climate protection and the energy transition.”

BlackRock has launched its BGF sustainable global UCITS fund in Europe. The Article 8 fund was created following strong demand from clients invested in the asset manager’s leading $15 billion BGF global allocation fund. The new fund will aim to achieve low carbon emissions, as well as limit exposure to companies exposed to fossil fuels. It will invest a minimum of 50 percent of total assets in securities classified as having positive externalities and will exclude securities with negative externalities. At least 90 percent of assets within the fund are ESG-rated. It will also seek to be compliant with the requirements set out by the French AMF Category 1 label, Belgian Febelfin, and German BVI Target Market Concept. The fund will be managed by global fixed income CIO Rick Rieder, along with five other investors from the global allocation investment team.

Dutch pension fund ABP has acquired a 49 percent equity stake in the largest US solar project, Gemini. The $1.2 billion project, located in Las Vegas, is due to become operational in 2023. It is projected to generate 690MW of solar energy and provide 1.42GWh of battery storage. Gemini is expected to create enough clean energy to power more than 400,000 homes during peak periods, as well as save 1.5 million metric tons of CO2 per year. The investment was acquired from Quinbrook Equity Partners through the pension fund’s provider APG.

Quilter Cheviot has launched a climate assets growth fund to complement its existing climate assets balanced fund. The new fund will focus on climate change and healthcare challenges. It will have an equity allocation between 75 percent and 95 percent, compared with 60 percent to 75 percent for the balanced fund. Seventy percent of the revenue generated by companies held in the climate assets fund range is aligned with one or more of the SDGs.

The Finnish Centre for Pensions (ETK) has found that long-term financing of pension funds is increasingly reliant on investment returns. ETK said that, while long-term pension financial outlook has improved “considerably” due to positive investment returns, uncertainty around future contribution has grown due to low birth rates in Finland.