Fund Solutions

This Week’s Fund News: BNY Mellon Offers “Unparalleled” Impact with EM Debt Fund

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including BNY Mellon, DWS, Milltrust Ventures, EFFV, SUSI Partners and responsAbility Investments. 

BNY Mellon Investment Management has launched its Responsible Horizons Emerging Markets (EM) Debt Impact Fund, offering investors “unparalleled” financial and impact opportunities, according to Portfolio Manager Simon Cooke. The fund invests in emerging market debt impact investments which target a positive, measurable social and/or environmental impact, as well as a financial return. It identifies securities and issuers expected to have a positive incremental impact in the context of the themes of people, planet and prosperity, mapped to the UN Sustainable Development Goals and EU Taxonomy. Cooke told ESG Investor that impact bonds will make up at least 50% of the fund, offering high levels of transparency to investors on impact. “You know exactly where your money is going and you’re going to see the reporting on how that’s achieved impact or not over time,” he said. The fund’s portfolio will be managed by BNY Mellon’s £653.6 billion global asset and risk manager Insight Investment, which has £213.8 billion under management in its fixed income group. Each of the fund’s potential investments has to pass Insight’s impact assessment framework which considers an issuer’s impact activity and reporting. Cooke said roughly 25% of impact bonds fail to pass Insight’s framework. He also underlined the importance of emerging markets and highlighted “two very simple reasons” for investment. “One is the scale of the impact you can achieve and the other is the financial return,” he said. “Emerging markets make up 85% of the world’s people. Emerging markets are 70% reliant on fossil fuels today [and] 99% of the world’s poorest people live there”. Cooke added: “If you want bang for your buck in terms of delivering impact, the potential impact in emerging markets is arguably unparalleled.” Cooke said that the potential financial returns were “equally important”. Following a backup in yields in 2022, emerging market corporates are offering the “the highest duration adjusted yields anywhere in fixed income”, he said. The fund, which meets the requirements of Article 9 of the EU Sustainable Finance Disclosures Regulation, will also invest in impact issuers and improving issuers. 

German asset manager DWS has unveiled a new suite of thematic equity exchange-traded funds (ETFs) in Europe targeting companies positively contributing to select UN Sustainable Development Goals (SDGs). The three ETFs cover SDG 9 (industry, innovation and infrastructure), 11 (sustainable cities and communities) and 12 (responsible consumption and production. Each fund tracks a MSCI-developed index constructed from the index provider’s MSCI ACWI IMI global equity benchmark, comprising large-, mid, and small-cap stocks from both developed and emerging markets. The methodology excludes companies involved in severe ESG-related controversies or UN Global Compact violations, as well as firms with business activities linked to controversial weapons, tobacco, thermal coal, and oil sands. The remaining stocks are then assigned ESG ratings, based on MSCI‘s seven-point scale from CCC to AAA. DWS is expected to roll out an additional four ETFs within its SDG suite by the end of the month, with three of the later funds confirmed to target the UN SDGs relating to good health, clean water and sanitation, and affordable and clean energy respectively. 

Milltrust Ventures, the venture investment arm of Milltrust International, and specialist food tech venture capital platform Earth First Food Ventures (EFFV) have partnered to launch the Smart Protein Fund. The fund will invest in alternative proteins and companies focused on plant-based proteins, cultivated meat, and fermentation technologies, as well as the infrastructure that will help scale the industry. These portfolio companies will have a significantly lower carbon footprint and reduced greenhouse gas (GHG) emissions, as well as offering attractive returns in a rapidly developing industry driven by innovative technologies. Alexander Kalis, Managing Partner at Milltrust International, said: “It’s often conveniently forgotten that the food industry represents 26% of global GHG emissions, more than all forms of transport combined. Time is of the essence if we are to reach our net zero imperatives.” 

Swiss-based infrastructure investment manager SUSI Partners has held its first close for a third credit fund, the SUSI Partners’ Energy Efficiency and Transition Credit Fund (SEETCF). SEETCF has accumulated €132 million in investor commitments to date, with SUSI investing more than €600 million into energy efficiency and broader energy transition solutions. The credit fund has received commitments from pension funds, insurance companies, and foundations based in the Nordics and the Germany, Austria, and Switzerland (DACH) region. The 15-year vehicle targets sustainable energy transition investments contributing to climate change mitigation while supporting the long-term development of businesses through the buildout of sustainable infrastructure and the provision of secure, affordable and clean energy. SEETCF has a €400 million target size and will focus on European countries while retaining optionality to deploy in other OECD markets, with the fund open to investors throughout 2023.  

responsAbility Investments, a Swiss impact asset manager specialising in private market investments, has closed two sustainable food strategies totalling US$274 million. This marks the close of the firm’s second private equity growth strategy in Asia and its first mezzanine financing strategy in Latin America. The Sustainable Food in Asia strategy reached US$173 million at first close and will focus on taking significant minority stakes in growth companies across South Asia and Southeast Asia. The final close is targeted to be between US$300-400 million. The investments will focus on mid and downstream companies propelling efficiency in food production and distribution across South Asia and Southeast Asia, including India, Indonesia and Vietnam. The Sustainable Food in LatAm strategy reached a first close of US$101 million. It will target investments in producers and exporters of mainly fruits and vegetables in Latin America, including Mexico, Peru, Colombia, and Chile. 

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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