Friday Funds: Half of all SFDR assets could identify as Article 8/9 within a year, says study

The latest developments in ESG-related funds

There are currently €3trn of assets being run through funds that class themselves as Article 8 or Article 9 under the EU’s new Sustainable Financial Disclosures Regulation (SFDR), according to research by Morningstar. Within the next 12 months, half of all assets covered by the SFDR could be classified under the two ESG-focused product categories, which were introduced earlier this year, the authors claim. However, Morningstar notes: “Fund companies have taken different approaches to product classification based on their own interpretation of the regulation, resulting in a wide range of ESG approaches represented in Articles 8 and 9 funds, with similar strategies featuring in both categories.”

Schroders has launched a new global sustainability fund, focused on “undervalued ESG leaders”. The Schroder Global Sustainable Value Fund will invest in companies leading their industry in sustainability, creating a positive impact and are undervalued versus the market.

Legal & General Investment Management (LGIM) has been accused of “extra strong greenwashing” by wealth manager SCM Direct after claiming that one of its Chinese bond ETFs is ESG focused. The LGIM ESG China CNY Bond Ucits ETF holds debt issued by the Chinese government and three state-owned banks. Adam Miller, SCM’s Chief Investment Officer, said in a blog that the ETF description was “misleading” as China fell short on alignment with the UN Global Compact and the ETF holdings were the same as non-ESG funds, merely reweighted according to each holding’s ESG score. LGIM has denied the greenwashing accusations. 

Meanwhile, LGIM and Achmea’s Innovation Fund have taken part in a $175m Series B funding round for UK electric vehicle subscription service Onto. Pollen Street Capital has provided the firm with an asset-backed debt facility of an undisclosed size. 

Quintet and Robeco have partnered to launch a USD green bond strategy, a ‘carve-out’ from Robeco’s global green bond strategy launched last year. The strategy will invest sovereign, sub-sovereign and corporate USD-denominated green bonds which pass its screening process and have strong reporting procedures in place. Quintet has committed €125m in seed funding to the strategy, which will be deployed in its discretionary portfolios.  

HSBC Asset Management has launched its first sustainable healthcare fund. The HSBC GIF Global Equity Sustainable Healthcare fund will be “fully ESG integrated” and invest in 35-40 companies which aim to improve healthcare affordability. The fund, available to HSBC’s wealth clients, will be biased towards mid-caps, long-term engagement, low turnover and active management interactions, with no fixed allocations across geography, sub-subsectors, company stage or profitability.

Impact Shares has launched a US affordable housing ETF. The Impact Share Affordable Housing MBS ETF will invest in agency mortgage-backed securities backed by pools of mortgage loans made to minority or low and moderate income families or families which live in “persistent poverty areas”. The ETF will be sub-advised by Community Capital Management. 

Oaktree Capital Management has signed a $265m funding agreement with Galway Sustainable Capital, securing a minority equity investment and a multi-tranche credit facility. Galway, founded in 2020, focuses on sustainable infrastructure across the US including renewables, green buildings and sustainable agriculture and is backed by Cordillera Investment Partners as a lead investor.

Foresight’s Italian Green Bond Fund has made a €7m investment in two project bonds to construct an anaerobic digestion plant in Sardinia. The plant will have the capacity to process 30,000 tonnes of animal waste a year and generate 0.6MW combined heat and power. The fund has now invested 91% of its committed capital and remains on target to be fully deployed by the end of 2021.

BNY Mellon’s Sustainable Global Equity and Sustainable Real Return funds, Jupiter’s Global Sustainable Equity and Montanaro’s two Better World funds have all been awarded FE fundinfo’s 5-Crown rating in the latest rebalance of its Crown Ratings. The five funds are among 17 to be awarded the rating, the highest possible, and join 392 other funds in the top tier.