Responsible Funds, Sept. 23: Luxembourg agency launches climate finance label

The round-up of the latest responsible funds developments

LuxFLAG, the Luxembourg Finance Labelling Agency, has launched a new climate finance label. It will be granted to eligible investment funds financing climate change mitigation and/or adaptation measures. Four asset management companies – East Capital, Finance in Motion, Luxembourg Microfinance and Development Fund and Nevastar Finance – have already committed to apply for it. It’s part of a broader push by the Grand Duchy to “to establish and position Luxembourg as an international center for climate finance”. “The LuxFLAG Climate Finance Label sets the scene for a transparent financial environment and provides investors with the necessary trust in climate finance investments,” said Finance Minister Pierre Gramegna. He added that the Luxembourg Financial Centre has evolved into a green financial hub with a “state-of-the-art framework for climate finance”. LuxFLAG chair Thomas Seale added the new label aimed to “unlock capital” from institutional and private investors to contribute towards the transition to a low carbon economy – and “separate the wheat from the chaff” and strengthen Luxembourg’s capacity to fulfill its goals set by the Paris Agreement.

Impact Ventures UK, a £36m fund providing risk capital to social enterprises, has been highlighted by co-investor Waltham Forest Local Authority Pension Fund who has committed £6.2m. The fund, whose investors also include Big Society Capital, the European Investment Fund and the Deutsche Bank Impact Investment Fund, has made a -22.3% return since inception according to the State Street performance report. Waltham Forest has also highlighted its holding in clean energy infrastructure fund Capital Dynamics as underperforming. It has returned -8.4% since its inception. Waltham Forest today became the of the UK’s Local Government Pension Schemes (LGPS) to decide to divest from all fossil fuels. It will “exclude fossil fuels from its strategy over the next five years”.

Allianz is planning ESG assessments for a third of its assets, it has said. The group, which manages some €640bn, will incorporate 37 ESG metrics into its analysis of more than $200bn of those assets, in a bid to help it boost investment returns and reduce risks. The move will be implemented by the end of the year, based on data from MSCI. More details are expected to be announced in November, RI understands.

Vancouver-based OceanRock Investments, manager of Meritas SRI Funds, is to invest in New Market Funds’ inaugural affordable rental housing fund, which aims to deliver affordable rental units in Canada’s largest cities. OceanRock CEO Fred Pinto said: “Our investment in New Market Funds meets our impact investing criteria—it offers competitive risk-adjusted financial returns, along with a positive long-term impact on people and communities.”

Netherlands-based ASN Bank, a wholly owned subsidiary of Dutch retail bank SNS Bank, has invested $25m in a note issued by the Global Climate Partnership Fund that aims to mitigate climate change through targeted investments in developing countries through a mix of public and private investment. ASN Bank will be the second private investor in the fund. The first private investment was made in 2012 when a German pension fund acquired a $30m note. Total invested capital invested in the fund is $392m.

TPG Growth, the emerging market arm of global private equity buyouts giant TPG, is reportedly setting up a $1bn social impact fund. The New York Times cites unnamed sources saying the firm will call it the Rise Fund.Kuala Lumpur-based CIMB-Principal Islamic Asset Management (Ireland) PLC has obtained approval from the Central Bank of Ireland to launch its Global Sukuk UCITS Fund. It is claimed to be Malaysia’s first global sukuk (Islamic bond) fund under Europe’s Undertakings for Collective Investment in Transferable Securities (UCITS) funds structure. The USD-denominated fund seeks to maximize total returns over the medium to long term through a combination of capital growth and income by investing primarily in a diversified portfolio of Shariah-compliant fixed income securities (Sukuk) issued by government and government-related entities, corporates or supranational entities, based mainly in the Middle East and Asia. The Shariah adviser for the Fund is CIMB Islamic Bank Berhad.

UK-based social investor Big Society Capital has made a “six figure investment” into London-based impact venture capital firm Mustard Seed. Mustard Seed was founded by Henry Wigan, former BlackRock portfolio manager and Alex Pitt, a former Goldman Sachs director, in 2015. Big Society Investment Director Alexander Goodenough said: “Mustard Seed has a growing network of engaged and socially driven high net worth investors who collectively wish to support socially impactful businesses across the UK. We are delighted to support its work to enable early stage social enterprises and mission-driven businesses to raise the investment capital they need in order to grow. We hope this will help to further develop the infrastructure of the social investment market.”

The Global Environment Facility (GEF) and conservation organisation Rare and Conservation International, have reportedly launched a first-of-its kind impact investment fund to support fisheries. The $20m Meloy Fund for Small-Scale Fisheries will attempt to attract impact investments into small-scale fisheries in Indonesia and the Philippines.

Canada-based Genus Capital Management has released a report showing that divesting from fossil fuels in 2013 would have produced stronger returns than global stock market indexes. The report’s data is based on three years of live performance results from the Genus Fossil Free CanGlobe Equity Fund, which excludes companies involved in the extraction, processing, storage and transportation of oil, gas and coal. Genus is based in Vancouver and has more than C$1.1bn of assets.

Timberland Investment Resources Europe LLP (TIR) has executed a first close of its TIR Europe Forestry Fund with an initial $74m of committed capital. It said a “diverse, mostly European group” of public and private pension plans, insurance companies and family offices limited partners made initial commitments. TIR will be targeting 8-10% returns with 3% annual distributions. Managing Partner Hugh Humfrey said investments are based on “in-house economic and biometric research methodologies” and being “boots on the ground foresters”.

A new £5.5m fund, offering grant and unsecured loan finance to social enterprises has launched across the North of England and the Midlands in the UK. Key Fund, a long-standing investor in community and social enterprises, is delivering the Northern Impact Fund, aimed at new and early stage enterprises who are seeking finance to support growth. It has received support from the Growth Fund, which is an initiative of Access – the Foundation for Social Investment.