Responsible Funds, October 24: Australian Ethical’s AUM rises 8% in three months

The round-up of responsible funds news

Australian Ethical Investment, the ASX-listed SRI firm, says its funds under management have risen 8.1% to AU$959.4m (€666.5m) as at the end of September, from AU$887.2m at the end of June. Managing Director Phillip Vernon said: “During the quarter our flagship fund, the Smaller Companies Trust celebrated its 20th anniversary. The fund has achieved a return of 10.0% per annum (net of fees) over that period, significantly outperforming its benchmark index by 3.1% pa.”

NEST, UK workplace scheme the National Employment Savings Trust, has launched a brochure setting out the policy that underlines its Ethical Fund for the first time. The policy, which draws on research of ethical concerns of NEST’s target market, shows that upholding human rights and labour standards, are among the top priorities. Paul Todd, assistant director of investment at NEST, said: “Automatic enrolment is making pension saving a mainstream activity. As people become more engaged with the connection between how they shop and where they invest their money, they’re going to start demanding high quality ethical funds that don’t force savers to compromise between their values and their prospects in retirement.”

A new report from independent financial adviser firm Barchester Green says that too many UK ethical funds are still invested in fossil fuels and heavily polluting industries. It says the top of its “sinner fund list” is Aberdeen Responsible UK Equity Fund, which has four oil, gas or coal companies in its top 10 holdings. Responding to the claims, Aberdeen Asset Management, told the Guardian: “The funds adopt an engagement approach with a negative screen overlay. The team engage with portfolio holdings on environmental, social and governance issues with the aim of encouraging demonstrable efforts and improvements.”

Hermes Investment Management, the fund management firm owned by the BT Pension Scheme, has teamed up with property services group Countrywide plc to create a residential property investment fund for the UK Private Rented Sector. The fund vehicle has been established with an initial £95m (€120.5m) of seed equity, inclusive of three assets in Manchester, Birmingham and Nottingham, and will seek to raise further capital and bank debt to fund investment.

Andreas Knörzer, Head of Asset Management at Notenstein, says that since the Swiss bank’s big push into sustainable investing earlier this year, it has taken in CHF1bn (€830m) in assets from institutional clients. As reported, Notenstein unveiled 10 new sustainable funds targeted to institutions last January. The fund roll-out was preceded by Notenstein’s recruitment of up to 50 investment and sales specialists from rival J. Safra Sarasin, including Knörzer himself.

Cornerstone Capital, the recently launched New York-based advisory firm, is launching an investment management arm. Cornerstone Capital Investment Management, which is hosting its launch event on October 28 in Denver, will be headed up by Phil Kirschman, who was formerly a senior partner at UBS Institutional Consulting. Erika Karp, CEO of Cornerstone Capital, said its investment management division would be an institutional consulting model.Forum Nachhaltige Geldanlagen (FNG), the German sustainable investment forum for Germany, has picked Novethic, the Paris-based sustainable research firm, to develop its planned “quality label” for sustainable investment funds sold in Germany. Speaking at a conference in Frankfurt earlier this week, FNG Board Member Sabine Pex said that now that the developer had been found, the label would be officially launched in November 2015. To qualify for the label, German funds must avoid cluster bombs and other controversial weapons, nuclear power and firms that violate human and labour rights as defined by the UN’s Global Compact.

F&C Investments has completed the re-branding of its Responsible Investment Funds that was announced in June. It means the F&C Stewardship Growth Fund, for example, becomes the F&C Responsible UK Equity Growth Fund. In total the range comprises eight funds.

Researchers at Lonsec have found that Australian equity responsible investments averaged a return of 15.7% for the year to August, according to reports. The research firm’s 2014/15 Australian & Global Equity Responsible Investment Sector Review shows the positive performance and reduced volatility for responsible investment in Australian equity funds, reported Business Insider. It quoted Senior Investment Analyst Steven Sweeney as saying that it was a “common misperception” that responsible investment does not make a reasonable rate of return “but in reality this is clearly not the case”.

Green Bonds

The State of Connecticut is issuing green bonds in November to fund $60 million of wastewater infrastructure projects for its $2.9bn Clean Water Program, which aims to improve water quality and protect public health. J.P. Morgan is selling the bonds for the state. Connecticut recently established a Green Bank, a quasi-public State agency to implement energy strategies for cleaner energy while creating jobs and enhancing local economic development. State Treasurer Denise L. Nappier, who also oversees the State pension fund, said: “We expect to attract investors interested in the State’s high credit quality bonds combined with a defined Green purpose.” The State of Connecticut Green Bonds will be included as part of a larger $300 million General Obligation bond issue. Link

Italian energy-efficiency and energy services firm Innovatec has issued a €15m six-year green bond with coupon, or interest rate, of 8.125%. The sole underwriter is JCI Capital and the issue attracted specialist investment firms. The proceeds will be for energy efficiency projects. “We consider Innovatec a pure-play company aligned with a climate economy, and it’s great to see a pure-play company choosing to label their bonds as green,” said industry group the Climate Bonds Initiative.

Separately, the initiative said the Climate Bond Partners program to support investors, issuers and underwriters to grow the green and climate bonds market was launched at the World Pensions & Investment Forum. Partners – banks, bond issuers, developers, NGOs and investors – get access to detailed data on bond issuance, market insights and opportunities to collaborate on events, investor education and government lobbying.