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Friday Funds: UK retail investors pumping £1bn per month into responsible investment strategies

The latest developments in ESG-related funds

UK retail investors invested an average of £1bn every month in responsible investment funds in 2020, according to research by the Investment Association. Net inflows in January 2021 reached £1.2bn, £703m of which was invested in equity funds, said the body, which based the study on its in-house responsible investment framework. Responsible funds under management now total over £56bn, a 66% growth in the past 12 months. Separate research by Refinitiv Lipper has found that UK ethical fund inflows more than doubled from 2019 to 2020.

BMO GAM has classified 16 of its responsible and sustainable strategies under the EU’s new Sustainable Finance Disclosures Regulation, which comes into effect next week. 15 of the funds fall under Article 8 of the rules, meaning they actively promote environmental or social characteristics through their investments. One fund comes under Article 9, which relates to strategies with sustainable finance as their objective. Both categories are subject to higher standards of disclosure under the new regulations.

Investcentre, the advisory arm of London-listed firm AJ Bell, has launched a Responsible Managed Portfolio service comprising six multi-asset portfolios, all of which have a 25% allocation to the VT AJ Bell Responsible Growth Fund. ETFs will track an MSCI SRI Index wherever possible. AJ Bell estimates that the ‘Balanced’ portfolio is 77% less carbon intensive than its Passive MPS equivalent.

The Renewables Infrastructure Group (TRIG) plans to sell up to 195m shares in a share offering launched today. Shares will be sold at a 5.7% discount to yesterday’s closing price, and will target a dividend yield of over 5%. Part of the money raised will be used to pay for TRIG’s stake in Beatrice, Scotland’s largest offshore wind farm, and other wind farms in Sweden. TRIG also announced a wider 12-month issuance, which aims to sell up to 600m shares in total.

A new venture capital fund has been set up to invest €200m in start-ups developing sustainable technology for cities. The 2150 fund, co-founded by Mikkel Bülow-Lehnsby, Chairman of Nordic real estate company NREP, and former Facebook executive Christian Hernandez, has €130m so far and expects to close with €200m by mid-2021. The main focus of the fund will be new construction materials and algorithms which improve the efficiency of building management.

CDP has released the results of its annual Climetrics Fund Awards. Amundi, Candriam, La Banque Postale Asset Management and Robeco each had two funds in the top 20, with Allianz, AXA, HSBC and Schroders also among the winners. CDP’s Climetrics rating system gives funds a one to five rating on how they deal with material risks from climate change, water security, and deforestation and is freely available online.

22 of 23 sustainable index funds surveyed by Morningstar outperformed their relevant conventional indexes in 2020. Morningstar’s Sustainable Fund Landscape Report also found that 52 of Morningstar’s 69 ESG-screened indexes outperformed their broad market equivalents, and that ESG indices outperformed over the last five years, and lost less than their conventional counterparts during market downturns.

Osmosis Investment Management has appointed Northern Trust to provide fund administration, global custody and depositary services for its Resource Efficient Core Equity (ex-fossil fuels) fund.

Invesco has launched a Global Clean Energy ETF, which will track the WilderHill New Energy Global Innovation Index to capture companies involved in clean energy generation and use, and energy conservation and efficiency. It has launched an India ESG Equity fund, investing 80-100% of assets in companies qualifying under Invesco’s ESG framework. It will primarily target large cap companies, and be benchmarked to the NIFTY 100 Enhanced ESG Index.

Legal and General Investment Management has launched a climate-tilted equity strategy based on its climate scoring framework. The strategy will have a 70% lower exposure to carbon emitting assets.  

Financial services company StoneX has acquired a minority stake in financial services firm Tigress Financial Partners, which claims it is the US’ only disabled- and woman-owned investment firm.

The US International Development Finance Corporation has loaned $50m to Northern Arc Capital to enable it to expand access to finance for women-owned businesses, or businesses which benefit women in India. Loans will also be made to businesses in the food security, water, sanitation and hygiene sectors.