Fund Solutions

This Week’s Fund News: Aviva Expands Sustainable Transition Range

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Aviva Investors, JPM AM, Schroders, DWS, Regnan, JO Hambro, Tabula IM and Impact Cubed.

Aviva Investors has added to its sustainable transition range with two new funds. The Social Transition Global Equity fund and Natural Capital Transition Global Equity fund aim to contribute to the UN Sustainable Development Goals (SDGs) while delivering long-term capital growth for investors. Both funds will invest in companies that are managing their social and environmental impacts and providing solutions to support the transition to a sustainable, low-carbon future. Aviva Investors will be employing an active ownership strategy for the funds to further drive change, engaging with the companies and also with policymakers to reform markets. The social fund will select companies that are changing their business models to better support human rights, decent working conditions and responsible corporate behaviour. It will also invest in companies providing solutions towards improved access to education and health. The nature fund will invest in companies transitioning their business models across themes such as sustainable land, oceans, the circular economy and climate change. It will also exclude corporates involved in harmful environmental activities. “There has, quite rightfully, been much focus on the path to net zero carbon emissions during COP26, but we should not forget that social issues and biodiversity are also important drivers of the transition to a fair and sustainable economy,” said Mark Versey, CEO, Aviva Investors.

JP Morgan Asset Management (JPM AM) has launched the Climate Change Solutions fund, the firm’s first to fall under Article 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR). The fund will invest in forward-thinking companies developing and scaling solutions to address climate change, such as clean energy or less carbon-intensive forms of agriculture and construction. JPM AM will use its natural language processing tool, ThemeBot, to screen over 13,000 stocks globally to better identify companies meeting these criteria. ThemeBot will seek to identify companies globally that are acting on climate change, from established players adapting their business models to early-stage innovators developing future technologies for the low carbon transitionincluding identifying small and mid-cap investment opportunities which are change makers in the field. JPM AM’s 90+ research analyst team will then assess the fundamental investment case for each of the stocks identified by ThemeBot, to help construct a differentiated and high-conviction portfolio.  Climate Change Solutions will be managed by portfolio managers Francesco Conte, Yazann Romahi and Sara Bellenda, who each bring over 20 years of industry experience. The portfolio managers will select their highest conviction ideas, drawing on JPM AM’s research analyst insights, as well as the climate change insight and stewardship experience of the firm’s Sustainable Investing team, in order to build an unconstrained portfolio of companies leading the way in delivering climate change solutions. “By combining artificial and human intelligence, our strategy seeks to capture innovative investment opportunities and technologies facilitating the low carbon transition,” said Massimo Greco, Head of EMEA Funds at JPM AM.

Schroders has launched a new global equity portfolio that will invest in companies driving the transition towards more sustainable food and water. The ISF Global Sustainable Food and Water fund is part of Schroders global transformation range,  a suite of funds offering investors long-term exposure to funds investing in future-focused themes. The newest fund will target emerging technologies and industries responsible for transitioning food and water systems to more sustainable operations and products, including recycling, food production and water management. It is classified as an Article 9 fund under SFDR. “Food and water already account for 26% of global emissions,” said Felix Odey, the fund’s Portfolio Manager. “The development of new technologies improving yield and efficiency and shifting dietary habits towards organic plant-based food, combined with stricter government action expected in agriculture and food packaging, offer huge earnings potential for well-placed companies that will disrupt and thrive in changing food and water markets.” The firm has also launched the ISF Global Climate Leaders fund, which aims to provide investors with exposure to companies that are benefiting from a competitive advantage due to their climate change leadership, such as implementing ambitious decarbonisation targets. It is classified as Article 8 under SFDR. “Achieving the goals of the Paris agreement requires a massive step change in the pace of emissions reduction globally. This fund will invest in those companies at the very forefront of making the necessary emission reductions,” said Simon Webber, the fund’s Portfolio Manager.

Xtrackers by DWS, the asset management arm of Deutsche Bank, has debuted an ESG global government bond ETF based on an ESG sovereign bond assessment and weighting framework developed by index provider FTSE Russell. The Xtrackers ESG Global Government Bond ETF’s methodology consists of 41 ESG indicators. “The new Xtrackers ESG Global Government Bond ETF aims to provide enhanced ESG characteristics while maintaining attractive risk-adjusted performance metrics. The goal is to provide a depth of analysis that moves the market forward in terms of providing intelligent and nuanced ESG exposure,” said Simon Klein, DWS Global Head of Passive Sales.

SCOR Investment Partners, the asset management arm of SCOR Group, has announced that its flagship corporate loans fund – SCOR Euro Loans – has now become SCOR Sustainable Euro Loans. Falling under Article 8 of SFDR, it has incorporated an ESG framework into its corporate loan investment process. The sustainable strategy will reinforce the fund’s existing credit analysis, exclusion policy and scoring to ensure a best-in-class selection process. “The revamping of our flagship corporate loans fund comes on the back of significant research undertaken by our portfolio management team and by the sustainable investment office. Our new investment process is a breakthrough in the asset class, where external ESG data coverage is very low, and access to reliable information remains a challenge,” said Fabrice Rossary, CEO of SCOR Investment Partners. This follows the SCOR Sustainable Euro High Yield fund which was launched in February 2021.

Engagement, advisory and research firm Regnan has partnered with J O Hambro Capital Management to launch an offshore vehicle for the Regnan Sustainable Water and Waste fund. It aims to generate capital growth over rolling five-year periods, pursuing sustainable objectives by investing in companies addressing global water and waste-related challenges along their value chains. “Our focus is to deliver compelling returns, diversification benefits and the highest standard of service to our investors, as global allocations shift towards more thematic and sustainable solutions,” said Betrand Lecourt, Head of Thematic Investments Strategies at Regnan.

The new Climate EUR IG Bond UCITS ETF launched by European fixed income ETF provider Tabula Investment Management aims to offer Italian investors access to a SFDR Article 9 fund. Having so far attracted US$100 million from a range of institutional investors, the ETF is focusing on corporate bond allocations with a 1.5°C Paris scenario, meeting the EU Paris-aligned Benchmark standards. Its ESG screening process excludes companies that have violated social norms, such as selling weapons and tobacco. “Tackling climate change is arguably the defining issue of our age and addresses a major risk to all investment portfolios. Investors need to utilise specialist climate solutions, and there needs to be a major shift of large asset pools into a range of climate impact investments,” said Michael John Lytle, Tabula’s CEO.

Impact Cubed, an ESG data and sustainable investment solutions provider, has launched its impact alpha strategy to deliver absolute returns while targeting ESG themes and climate solutions. It aims to take long positions in companies with positive ESG and impact factors while shorting those with negative ESG factors, such as high carbon emissions. Climate related themes in the strategy include climate solution providers or sustainable food and agriculture solutions that reduce carbon emissions. Impact Cubed’s award winning ESG and impact data is used to uncover potential equities for investment and quantify the impact of the overall strategy. “Our in-house ESG data gives the investment team an edge, but we also take a fundamentally different approach from other ESG or climate strategies,” said Larry Abele, Chief Investment Officer at Impact Cubed. “We draw on decades of ESG long short experience to create smarter themes that go beyond the very common – and overplayed – strategies focused on ESG scores or renewable energy.”

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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