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Responsible Funds, February 1: ESG derivatives planned by Eurex exchange

The latest responsible funds developments

The Eurex derivatives exchange is launching three ESG index futures, citing the “massive growth” of ESG investing. They will launch on February 14 and cover the STOXX Europe 600 ESG-X, Low Carbon and Climate Impact offerings. Eurex said the initiative would provide “investable and easy access” to ESG derivatives while offering lower carbon footprints and lower trading costs for institutional investors. “Asset owners can further manage unwanted sustainability risks, seek additional alpha and better meet their various investment mandates,” it said, tweeting about “The future(s) of #ESG”.

Climate disclosure body CDP has teamed up with Amundi subsidiary CPR AM to launch a global equity fund dedicated to fighting global warming. The fund – the first CDP has helped create – will use CDP data to target companies that best manage climate risk and strive to meet the Paris goals. Managed by global equities fund manager Alexandre Blein, the fund will have an investment universe of 700 stocks globally.

Schroders has launched a multi-factor ESG fund using its new SustainEx proprietary framework to measure the positive and negative effects that companies have on society and the environment. The Schroder ISF Sustainable Multi-Factor Equity aims to outperform – and have less than half the carbon footprint of – the MSCI All Country World index, while echoing the work of the existing Global Multi-Factor Equity fund. Link

US-domiciled open-end and exchange-traded ESG funds attracted nearly $5.5bn in net flows last year, making it the third year in a row that the sustainable fund flows have hit a record high, according to Morningstar’s Jon Hale. Meanwhile, the overall US fund universe saw its lowest calendar-year flows since 2008.

The new Solactive ISS ESG Screened Index Series aims to track various size and regional segments of the global capital markets, such as Japan, the United States, Europe, and Developed Markets, including only companies that have a record of low involvement in controversial areas, according to market standards on ESG controversy screens. Solactive worked with ESG data and analytics provider ISS ESG.

Aegon Asset Management is planning to launch a debt-based strategy centred on the Sustainable Development Goals. Speaking at an event hosted by the University of Cambridge’s Institute for Sustainability Leadership (CISL), Aegon’s Senior Responsible Investment Manager, Emanuele Fanelli, told the audience: “I’ve been working very closely with our fixed-income team in the US, where we are about to create a strategy that will launch in a few months, where the SDGs will be at the core of the fixed-income strategy”. He did not disclose further details. Aegon is a member of CISL’s Investment Leaders Group, which yesterday gathered to launch an Impact Framework based on the SDGs.Finland’s Varma Mutual Pension Insurance Co. has excluded lignite and coal firms “for ethical reasons”. In its recently updated RI principles, the pension insurance company – which is Finland’s largest – said it would exclude firms relying on coal and lignite operations for more than 30% of their net sales, as well as ramp up ESG monitoring for all industries that are significantly exposed to climate risks. Varma will also begin disclosing its climate-related risks in line with the TCFD recommendations, as well as encouraging its investees to do the same.

Lombard Odier Investment Managers (LOIM) has reportedly binned its European credit fund to focus on the fund’s ESG equivalent. The LO Funds – Euro Credit Bond fund was closed to investors this month, and is currently being rolled into its ESG counterpart, the LO Funds – Euro Responsible Corporate Fundamental. LOIM also runs a Global Climate Bond Fund with Affirmative Investment Management.

ADM Capital’s Cibus Fund, which became the first to receive the Guernsey Green Fund regulatory “kitemark” in October last year, has closed at $322m after seeing its subscriptions leap following accreditation. Subscriptions for the agribusiness-focused private equity vehicle had stood at just $208m in September.

Morningstar has teamed up with ESG house Sustainalytics, in which it has a 40% stake, on a suite of low carbon risk indices. The Morningstar Low Carbon Risk Index Family uses Sustainalytics’ Carbon Risk Rating to offer exposure to global companies that have low carbon risk and low fossil fuel exposure.

Asset manager Quantum Advisors and former Tata executives have partnered on a $1bn ESG fund which will invest in Indian public equity markets. The fund will invest in firms with a high ESG score and improve others by working closely with boards and management, taking a “private equity approach” to engagement. The fund is looking to raise capital from sovereign wealth funds, pension funds and endowments.

SEB is investing DKK200m (€26.8m) in the Danish SDG Investment Fund through its traditional life insurance operation. The fund, which is managed by the Danish government-owned Investeringsfonden for Udviklingsland (IFU – the Investment Fund for Developing Countries), is aimed at furthering the UN sustainability goals by investing in developing countries and sectors such as renewable energy, water and sanitation. Announcement

The Church of England Pensions Board, Sweden’s AP funds’ Funds Ethics Council, APG, Robeco, LGPS Central, NZ Super and BMO GAM have baned together to demand a tailings dam classification system with corresponding highest safety standards in the wake of the Brazilian dam disaster. The investors are convening an “urgent meeting of global experts to advance this request”.