Responsible Funds, December 23: LuxFLAG names first funds to secure Climate Finance Label

The round-up of the latest responsible funds developments

LuxFLAG has named the first three funds to be awarded its new Climate Finance Label. Hong-Kong based East Capital China Environmental, Green for Growth Fund Southeast Europe and Nevastar Finance Luxembourg Climate Change+ Fund have secured the label, which was launched in September to address products directly related to tackling climate change. At least 75% of the total assets of eligible funds must be invested in mitigation and/or adaptation projects. BNP Paribas L1 Smart Food and Parvest Smart Food have been awarded LuxFLAG’s ESG Label for the first time, and Maj Invest Financial Inclusion Fund II K/S has been granted the Microfinance Label. Finally, Jupiter Global Ecology Growth has bagged an Environment Label.
Foresight Group has launched an unlabelled green bond fund focused on Italy, with backing from the European Investment Bank. The firm, which has traditionally focused on equity, told RI that Italian banks are not lending to smaller renewables projects, favouring larger opportunities. “That’s left a lot of projects struggling to find finance, so we are filling that gap,” said Yanti Falangola, Senior Manager, Institutional Capital at Foresight. Foresight will identify companies with eligible projects in solar, wind, biomass, district heating and energy efficient public lighting, and will structure and arrange bonds for them, which the fund – run through an SPV – will subsequently buy. “We’re looking at an investment-grade portfolio with an internal rate of return of between 6% and 8%,” said Falangola. The bonds, which will each be less than €20m, will be amortising and won’t have second-party opinions or formal green labelling because “by their nature they are green – we are only interested in projects that clearly help to decrease the carbon footprint of Italy”. Foresight hopes to reach first close up to €80m in the next six months, with a final target of €200m. Falangola said he was in talks with “a number of institutional investors, mainly in Italy”, adding that interest was largely from pension funds, insurance companies and other investors keen to match long-dated liabilities with long-term assets. The fund has a maturity of seven-years, with exit strategies in place, and asset-lifetimes of between 15 and 18 years. The EIB has agreed to put in up to €40m to the fund.
Natixis Global Asset Management is reportedly seeking to be the first asset manager to launch 401(k) target-date mutual funds focusing on ESG issues. It has been launched to reflect recent guidance issued by the US Labor Department saying retirement-plan fiduciaries can acknowledge ESG when selecting investments for 401 (k) plans. Dubbed the Natixis Sustainable Future Funds, it will make investments based on issues such as “fair labour, anti-corruption, human rights, fair business practices and mitigation of environmental impact”.Cambodian microfinance institution Prasac has agreed a $20m green lending facility with a fund managed by responsAbility. The money will be used to support renewable energy and energy efficiency projects in the country by offering loans to a “very broad section of the population”. 90% of Prasac’s current borrows are based in rural Cambodia, but it claims to also serve middle-income householders and SMEs. Eligible projects could include energy-efficient farming equipment, household appliances and rooftop solar.
Amundi is reported to have merged its low-carbon funds earlier this month. The Paris-based investment giant is said to have created one fund out of its two Amundi Index Equity Europe Low Carbon funds. One of the former funds was domiciled in France and was launched last year. It was followed this September by the creation of a Luxembourg-based version, to appeal to a wider audience. On December 8, the French fund was essentially absorbed into the Luxemourg-domiciled one, according to reports.
US-based impact investor AlphaSource has launched a climate-focused investment fund owned and managed by women. The Alphasource Climate Fund will invest in both debt and equity. Its priority will be certified REDD+ projects whose revenues (from the sale of carbon credits) remain mainly within the community in which they’re generated. “Our mission is to support people who are making a difference in sequestering carbon and supporting the communities who are tasked with protecting their forests,” AlphaSource said. The fund also plans to make investments in businesses that support forest conservation in landscapes that are likely to become jurisdictional REDD+ programs, it added. Initial focus areas include Indonesia, the Congo Basin, the Guinean Forest and Amazonia; and the fund will work with the World Bank and Rainforest Alliance to identify projects. Everland will sell the voluntary reduction credits to companies seeking to offset their own carbon emissions.
Rockstar Bono, serial entrepreneur Richard Branson and eBay founder Pierre Omidyar are just some of a host of celebrity figures who are to be board members of a new $2bn social impact fund in development by William E. McGlashan Jr., a partner at private equity firm TPG. The New York Times reports that the social impact fund – dubbed Rise – will be part of TPG, and plans to invest half its capital domestically and the other half in emerging markets. Its all-star board, who are also investors, also includes Jeff Skoll, the first employee of eBay and famed philanthropist, and Reid Hoffman, a founder of LinkedIn.