Friday Funds: Union Investment sees retail investors pile into sustainability

The latest developments in ESG-related funds

Union Investment has reported that retail clients “have joined institutional clients in increasingly choosing sustainability-oriented solutions”. It said: “In the first half of 2020, sustainability funds accounted for half of the volume of new business. Sustainably invested assets under management in the retail business increased to €9.2 billion as at the reporting date, compared with €5.0 billion a year earlier.”

British clean energy investor Octopus Renewables has signed a deal to purchase 14 subsidised solar plants in France with a total installed capacity of 119.5MW. The €58.9m purchase comes after Octopus Renewables expanded its UK portfolio with the purchase of 9.1MW of residential rooftop solar assets.

New research from Linklaters shows a third of fund managers at infrastructure investment funds are unaware of EU disclosure requirements due to come into force in March 2021. The law firm’s survey of 300 European infrastructure investment fund managers also found that ESG credentials and transparency are joint-second most important factors for fund managers. 

SUSI Partners has raised €300m for a new flagship equity fund which holds the biggest closing of any SUSI fund to date. The fund focuses on clean energy infrastructure investments in OECD countries to help mitigate climate change by reducing CO2 emissions. 

Morgan Stanley Investment Management has launched two sustainable fixed income funds – the MS INVF Sustainable European Corporate Fund and the MS INVF Sustainable European Strategic Fund. Both will take an active approach to sustainable investing.

A new Australian equity index, developed by BNP Paribas SA and supported by the Australian government’s green bank, will support and reward 100 companies doing the most to halt climate change. The French bank has issued A$140 million in green bonds linked to the Australian Climate Transition Index. 

DWS has launched a new ESG-focused short-duration corporate bonds ETF. The ETF is euro-denominated and tracks the Bloomberg Barclays MSCI Euro Corporate Sustainable & SRI 0-5 Year index. The index also negatively screens business activities, such as controversial weapons, alcohol, tobacco, gambling and adult entertainment.

Morgan Stanley Investment Management has launched two new fixed income strategies designed to capitalise on a green-led recovery in Europe. The Luxembourg-domiciled funds will seek to maximise returns while contributing to sustainability themes such as decarbonisation, and the UN SDGs.

UK pension provider Scottish Widows has invested £2bn in BlackRock’s new Authorised Contractual Scheme (ACS) Climate Transition World Equity Fund. The fund measures a company’s exposure and management to transition risks and opportunities to provide investors with a broad market approach to invest in the transition to a low carbon economy. 

New Morgan Stanley research shows that ESG exchange traded funds assets under management (AUM) have grown seven-fold since June 2017. While ESG ETFs make up only 1.7% of the overall $5.2tn ETF market, this is growing rapidly. The research also shows that tech accounts for 19% of ESG ETF AUM, followed by Financial Services (15%) and Healthcare (14%). 

Fondo Italiano per l'Efficienza Energetica, the Italian fund focused on efficiency for energy transition, has launched its second fund – the Italian Energy Efficiency Fund II (FIEE II) – with a first close of €127.5m. This was above the original €100m target; the aim is to reach €175m by year-end. Investment came from the European Investment Bank (EIB) and “prestigious Italian institutional investors and family offices”.

AXA Investment Managers has launched an ESG-focused, euro-denominated emerging market debt fund. The AXA WF Emerging Markets Euro Denominated Bonds fund will invest in emerging market growth opportunities, while avoiding distressed debt. 

Fulcrum Asset Management has launched the first active global equity fund to be climate-aligned. The fund is expected to hold between 150-200 stocks invested across 25 themes, with no company in the portfolio having a higher temperature than 2.5 degrees.