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Responsible Funds Sept. 22: who’s launching funds and who’s investing?

The latest responsible funds news.

Mirova, the responsible investment arm of Natixis Global Asset Management, has launched a new SDG aligned land degradation global impact fund – with a target size of $300m. The Land Degradation Neutrality Fund, which is currently ‘on-boarding’ investors, names European Investment Bank (EIB), French Development Agency (AFD) and the Grand-Duchy of Luxembourg as potential backers. It also states that a number of private investors, including pension funds and insurance companies have also confirmed their interest. Supported by the United Nations Convention to Combat Desertification’s Global Mechanism, the global impact fund, which will focus 80% of its investment in developing countries, aims to bring together “public and private investors to fund projects that contribute significantly to land degradation neutrality”. The fund was initiated by the UN who released an international tender – won by Mirova – in 2015.

UK bank Barclays has responded to market demand with a new pioneering impact fund. The Multi-Impact Growth Fund – claimed to be a UK banking first – invests in “specialist third-party funds” selected on the basis of their impact around key social and environmental issues as well as their potential for strong financial returns. Damian Payiatakis, Director of the Impact Investing business at Barclays, said: “[t]he launch of this precedent-setting Fund demonstrates Barclays’ commitment to building its Impact Investing business and providing financial solutions for global challenges”.

The emerging markets fund of MEAG (Munich Ergo Asset Management), the German funds house, has started to factor in sustainable investment criteria since September 12, changing its name to “MEAG EmergingMarkets Rent Nachhaltigkeit”. The fund combines emerging market bonds with the sustainability megatrend. Taking into account sustainability criteria for emerging markets is, according to MEAG, highly profitable. Daniel Mumzhiu, senior portfolio manager at MEAG, says: “The investment topics of sustainability and emerging markets’ bonds are a good fit as emerging markets and companies considering sustainability principles in those markets are often good debtors, which should have a positive effect on the return of investment.” The fund’s universe consists mostly of government bonds. Corporate bonds can be added to optimise opportunities and risks. Analysis of debtors’ quality is core for the title selection of the fund. 

German index provider Solactive has launched three new thematic indices constructed around workforce efficiency, corporate longevity, and value investing. The Solactive Intuitive BetaTM Indices, which targets index-linked products, such as ETFs and structured products, claims to go beyond purely quantitative screens and gives intuitive reasoning a prominent role in defining the passive investment strategy. Timo Pfeiffer, Head of Research at Solactive, said “Intuitive BetaTM promotes an approach based on intuitive and straightforward stories that should of course also translate into performance.”

Street Global Advisors (SSGA), the investment management arm of State Street, has reportedly announced that it has divested tobacco and weapons due to pressure from institutional investors. As of 31 July 2017, the State Street Global Index Plus Trust has excluded twelve companies specifically involved in manufacturing tobacco, cluster bombs, landmines, chemical and biological weapons, and depleted uranium weapons.

Arabesque Asset Management, the UK based provider of “self-learning” ESG quant models, has launched its first US fund targeting US equities. The Arabesque Systematic USA Fund, benchmarked against the MSCI USA, integrates “ESG with fundamental analysis and risk management”. Launched in May 2017, the fund currently holds $15m and is expected to grow to $50m by the end of the year. Andreas Feiner, Head of ESG Research and Advisory at Arabesque, told RI that they also plan to launch another fund, the Arabesque Systematic International Fund, before the year’s close focusing on developed markets excluding the US.

The Ecosystem Integrity Fund (EIF), the San Francisco-based sustainability-focused venture capital firm, has led the funding on a Series A round of equity funding of US solar firm Pegasus Solar. EIF is joined by Californian long-term venture capital and management firm, Okapi Capital, as an additional partner in the funding. EIF made its investment out of its EIF Fund III, the financial terms of the transaction were not disclosed.

The Investment Association, the UK trade body whose members collectively manage over £5.7tn, has reported that for the month of July 2017 net retail sales of ethical funds were £129m. In its monthly statistics of UK investor behaviour it also found that in that month £14bn – 1.2% share of industry funds under management – were invested in ethical funds.UBS Investment Management is set to launch a pioneering series of UN Sustainable Development Goals (SDGs) dedicated investment products. It was announced that the new products will be linked to sustainability and impact screened indices which will target specific investor groups based on themes. The themes include a global sustainability index, a social equality-based LGBTQ investment index, and an index linked to the environment and clean energy. The Swiss wealth management giant will also donate a “pre-defined portion of revenues” as philanthropic contributions to the products, which will be managed by its dedicated philanthropic foundation, UBS Optimus Foundation.

NEST, the UK’s five-million-member strong workplace pension scheme, has withdrawn £27m from companies “not making progress on adapting for a low-carbon future” and re-allocated it to those that “are positioned to benefit from a global transition to a low carbon economy”. Citing “risks to members’ returns” as motivation for the move, the fund has increased its investments in renewable and green technology companies such as Iberdola, Vestas Wind Systems, and Siemens Gamesa Renewable Energy. The announcement comes the pension fund published it annual responsible investment report.

Three ESG exchange traded funds (ETFs) created by Japan’s Daiwa Asset Management will be traded on the Tokyo Stock Exchange – as of 26 September 2017 – after being approved by the exchange’s operator, Reuters reports. The Japan Exchange Group approved the listing of Daiwa ETF FTSE Blossom Japan Index, Daiwa ETF MSCI Japan ESG Select Leaders Index, and Daiwa ETF MSCI Japan Empowering Women Index. The ETFs will track the same indexes adopted – in July 2017 – by Japan’s $1.3tn pension colossus, the Government Pension Investment Fund, as it increased its ESG allocation in Japanese equities from three percent to ten.

Rose Housing Preservation Fund IV L.P., a New York based fund dedicated to affordable housing, has raised $233m from around 125 investors, including the Ford Foundation, Deutsche Bank AG’s Community Development Finance Group, and an affiliate of Nuveen, the asset management arm of financial-services giant TIAA, the WSJ reports. The fund, created by New York housing developer Jonathan F.P. Rose, aims to acquire, improve, and preserve affordable-housing properties.

Dutch pension investment giant APG has announced it is launching the first sustainability orientated “concentrated equities strategy” investing in China A-shares. The strategy has been developed with E Fund, the third largest fund manager in China – managing assets of $167bn. Ronald Wuijster, acting CEO of APG Asset Management, said: Our RI approach combined with local intelligence will create unique investment opportunities for us in China. We are hoping to set a trend and share our knowledge and experience with other institutional investors”.

Dutch development bank FMO aims to catalyse financial inclusion in Africa with the launch of its new online platform, FinForward. FinForward is a nine-month program, in collaboration with US fintech firm, Above & Beyond, which aims to link fintech firms across the world with financial institutions in Africa. The matching and integration tool aims to help African financial institutions “reduce costs, innovate, add services, tap into new revenue streams, and work towards open banking platforms” so it can reach those most excluded, such as women and small entrepreneurs.

The number of property companies and real estate funds completing the GRESB Real Estate Assessment of ESG performance hit a high of 850 this year, representing 77,000 property assets valued at over $3.7 trillion. GRESB said that globally, the average GRESB score increased to 63 points out of 100, up 3 from 2016, representing improvements in ESG performance including a total reduction of like-for-like carbon emissions by 2.2% and water consumption by 0.5%. GRESB, which is a stand-alone subsidiary of GBCI, the certification body, also lists the top scoring real estate developers and funds by region. 

French insurer AG2R La Mondiale has committed €100m to a new a debt fund designed to support small French businesses. The Eiffel Croissance Directe fund – launched by corporate finance specialist Eiffel Investment Group – has reached a total commitment of €115m, with an expectation that this will rise to €300m in 2018. It aims to finance up to 100 business with investments of between €1m and €5m over the next few years. The European Investment Bank Group is providing an initial guarantee to the fund of €50m via its subsidiary the European Investment Fund (EIF).