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Responsible Funds, March 24: Circularity Capital raises £21m for ‘circular economy’ fund

The round-up of the latest responsible funds developments

Circularity Capital, the innovative private equity fund that invests in companies in the no waste ‘circular economy’ is understood to have raised £21m (€24.25m) in a first close of a dedicated fund. Market sources said the investors included major institutions and family offices. Circularity Capital declined to comment on the fund or investors. Circularity says it targets equity investments of £1-5m in profitable, fast growing European SMEs operating in the circular economy. In contrast to the linear model of production-consumption-disposal, circular economy companies produce goods that can be completely recycled. Often, the business models involve leasing of equipment that is re-used/recycled by the supplier. Its partners Include Ian Nolan, former Chief Investment Officer of the UK Green Investment Bank and before that CIO of 3i Group, as well as Jamie Butterworth, former Founding CEO of the Ellen MacArthur Foundation, the body founded by the celebrated yachtswoman that is one of the biggest NGOs promoting the circular economy.

The €417.75m LGT Sustainable Equity Fund Global from Liechtenstein’s LGT Capital Partners returned 5.4% in February, versus a benchmark (MSCI World (EUR) (NR)) return of 4.53%. It the past 36 months it has retuned 20.31% against a benchmark return of 14.8%. “The month of February was positive for the vast majority of equity markets,” it said in a commentary. “Stronger- than-expected global growth was in focus while concerns about China, protectionism and geo-politics were largely ignored. Sector-wise, we saw an outperformance, or at least a stabilization, of Health Care and Consumer Staples which had come under pressure during the latter part of 2016. Materials and Energy on the other hand were lagging.” The portfolio benefited from its significant overweight in Health Care.

China has launched its first green index, the Real Estate Green Supply Chain Initiative to improve the environmental management of the country’s supply chain – 71 real estate companies with sales revenue of $188.78bn have signed up to the initiative, according to a Reuters report.

Morningstar has downgraded the Triodos Sustainable Bond to negative, citing “persistent staff turnover” at manager Delta Lloyd. Triodos said recently it was phasing out its relationship with Delta Lloyd. Morningstar analyst Niels Faassen wrote: “After the departure of several prominent portfolio managers, Delta Lloyd recently announced that Arnold Gast, the former head of corporate bonds, has also left the fund company. Persistent staff turnover on Delta Lloyd’s fixed-income teams and the fund’s strict investment mandate and sustainability criteria, which lead to a highly concentrated and relatively defensive portfolio, make for a poor offering in our view.”

French social management company IMPACT partenaires is launching a €50m IMPACT creation fund dedicated to creating franchises in deprived urban areas of France. The fund will generate more than €200m in turnover and create more than 2,000 jobs over ten years.ESG research firm Vigeo Eiris has launched the CAC40 Governance Index, which ranks companies in Euronext’s Paris market benchmark according to their corporate governance performance.

Norges Bank Investment Management, which runs Norway’s Government Pension Fund, said “product-based exclusions” (such as tobacco and weapons makers) have reduced the return on the equity index by close to 1.9 percentage points. But this was mitigated by the “positive contribution” of the conduct-based exclusions, primarily the environmentally based exclusions of mining companies. It said: “Over the last eleven years, the equity benchmark index have returned 1.1 percentage points less than an index which is unadjusted at constituent level.”

The African Development Bank (AfDB) has approved the conversion of its Africa Climate Change Fund (ACCF) to a multi-donor trust fund. The governments of Italy and Belgium will be the first to contribute to the fund with €4.7m and €2m respectively. The fund was established in 2014 with €4.7m from the German Government.

Dutch social investor Oikocredit has announced that its inclusive finance portfolio, which includes financing for microfinance institutions and banks supporting small to medium enterprises, grew 11% (€814.5m) from 2015 to 2016. Over the same period Oikocredit’s inclusive finance share of the total portfolio decreased from 82% to 78% as result of diversifying into agriculture and renewable energy.

Places for People, the UK Social Stock Exchange-listed property company (£3.1bn in assets), has launched a new fund management business called PfP Capital. The firm’s first fund (PfP Capital PRS Fund) will purchase £150m in privately rented UK residential units from Places for People, with a view to invest a further £150m in acquiring similar properties across the UK. Link

The Washington Area Community Investment Fund (Wacif), a US community development financial institution, is launching the Ascend Capital Accelerator, an intensive eight-week program offering local minority and women entrepreneurs the opportunity to strengthen their business model and ability to access growth capital.

The European Investment Bank (EIB) is currently appraising a fund proposal by UK infrastructure and private equity firm Foresight Group. The prospective fund will target investments in UK and EU based renewable energy and renewable energy enabling infrastructure projects.

UK-based investment manager M&G Investments has joined the Climate Bonds Initiative’s Partners Program. The program aims to draw on its members’ experience (including banks, bond issuers, developers, NGOs and investors) to grow investment in climate change solutions, participate in market development committees, and help define policy agendas for sector, country and sub-national programs.