Fund Solutions

This Week’s Fund News: Federated Hermes, AP1 Join Forces for HY Climate Change Fund

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Federated Hermes, AP1, APG, BlackRock, Fidelity, GAM, LGIM, Nordea and Trill Impact. 

Federated Hermes has added to its impact suite with the launch of the Federated Hermes Climate Change High Yield Credit Fund, a UCITS fund seeded by and designed in partnership with Swedish National Pension Fund AP1. It aims to generate long-term, risk-adjusted outperformance by “investing in attractive high-yield credit instruments” and deliver positive impact that supports a low-carbon future. The investment process will include using a proprietary framework – the Climate Change Impact (CCI) Score – to reflect the progress and impact towards decarbonisation that holdings are making. The fund will not hold companies where engagement on climate change transition has failed and will exclude controversial sectors and heavy greenhouse gas-emitting issuers that have no desire to change. Fraser Lundie, Head of Credit, will be lead manager on the fund working alongside Nachu Chockalingam, Senior Credit Portfolio Manager, as co-manager. They will be supported by the 12-member credit team including Mitch Reznick, Head of Research and Sustainable Fixed Income, who is instrumental in implementing the climate framework into the investment process. The team’s dedicated fixed income engagers, supported by EOS at Federated Hermes, the firm’s global stewardship team advising on US$1.75 trillion, will seek positive action on climate change through a robust engagement plan with the portfolio holdings. “Having divested from fossil fuels throughout our portfolio last year, our ambition now and going forward is to contribute to getting absolute emissions down significantly in the real economy. Providing financing to facilitate a much-needed transition across sectors is an example of the actions we undertake in order to meet our net zero target we are determined to achieve,” said Tina Rönnholm, Portfolio Manager responsible for external High Yield investments at AP1.

Amsterdam-based APG Asset Management is collaborating with analytics and index provider Qontigo and asset manager BlackRock, to launch a new family of iSTOXX APG World Responsible Investment indices. The iSTOXX APG World Responsible Low-Carbon SDI Index will be used for a sustainable development investments (SDI) mandate managed by APG Asset Management in collaboration with BlackRock, with an initial investment of approximately €1 billion. The indices were built using APG’s data sets, including one derived from the Sustainable Development Investments Asset Owner Platform (SDI AOP), founded by institutional investors in 2019 to accelerate investment aligned with the UN Sustainable Development Goals (SDGs). “The development of the iSTOXX APG RI Index Family is a clear result of APG’s and its pension funds clients’ ambition to steer increasing amounts of capital towards solutions contributing to the SDGs,” the partners said. “It aligns with the objectives of pension fund clients who have set clear goals as to what extent their investments need to contribute to the SDGs.” Using the iSTOXX World-A Index, a World Developed Markets Index, as the starting universe, the indices incrementally ‘layer in’ specific ESG filters, allowing APG to measure and report on the impact on return and risk budget (measured by tracking error) for each of the individual criteria. Qontigo’s suite of Axioma portfolio solutions were used to build the STOXX indices.

Fidelity International has launched the Sustainable Climate Solutions fund, a global equity portfolio of decarbonisation leaders and beneficiaries. Managed by sustainable thematic investors Velislava Dimitrova and Cornelia Furse, the fund will invest in companies that are enabling global decarbonisation efforts by offering sustainable technologies and solutions designed to reduce greenhouse gas (GHG) emissions. Classified as an Article 8 fund under the EU’s Sustainable Finance Disclosure Regulation (SFDR), a minimum of 70% of the fund’s net assets will be invested in securities of companies maintaining sustainable characteristics. “The decarbonisation trend is currently at the early stage of penetration and will be driven by a combination of innovation, improving economics, accelerated governmental support and changing consumer behaviours. It is the stocks exposed to these themes that will drive superior investment opportunities for our investors,” said Furse.  

GAM Investments has a new sustainable climate bond strategy, classified as Article 9 under SFDR. It aims to allocate to green and sustainability bonds with positive environmental impact that are issued by the European financial sector. The launch responds to growth of the market, with bonds for climate change solutions now worth more than US$100 trillion. Managed by Geneva-based fund management company Atlanticomnium, the strategy will adopt an active, bottom-up and high-conviction approach, investing in bonds allocating proceeds to eligible green projects, such as green buildings. The investment team will assess the suitability of bonds using GAM’s green bond assessment framework, which analyses the issuer, bond and green asset level“We firmly believe asset managers need to be at the forefront in driving change and designing solutions to help clients navigate the low-carbon transition. The sustainable climate bond strategy is a compelling offering for investors seeking to generate both a meaningful environmental impact and attractive returns,” said Stephanie Maier, Global Head of Sustainable and Impact Investment at GAM. 

Legal and General Investment Management (LGIM) is targeting institutional investors in the UK and Europe with its new L&G ESG Paris Aligned World Equity Index fund. Tracking the performance of the Solactive L&G Developed Markets Paris Aligned ESG SDG Index, the fund will offer a broad ESG exposure to developed market equities while simultaneously integrating Paris-aligned reductions in carbon emissions and contributions to the UN Sustainable Development Goals (SDGs). The London Borough of Newham Pension fund has invested £520 million into the SFDR-aligned Article 9 fund. The new fund also tilts towards companies with strong social and governance scores, excluding companies involved in activities such as controversial weapons and tobacco production. “ESG is a key consideration for us, as we look to contribute towards positive environmental change, while also ensuring that our investments avoid future risks. This is underlined by our investment in LGIM’s Paris-Aligned fund, which is with a view to supporting the long-term future of our investments, as well as society and the planet, said Councillor Naresar Osei, Chair of the London Borough of Newham Pensions Committee. 

Backed by Nordea Asset Management, private investments firm Trill Impact has closed €900 million in commitments from global institutional investors for its inaugural impact mid-market buyout fund. Since the launch of the fund, Trill Impact has collaborated with Nordea’s responsible investment teams to drive its four first transactions, targeting investments in Northern Europe that seek to deliver lasting impact in private equity markets. “Our longstanding mission has been to provide returns with responsibility. This is very much what drove our venture with Trill Impact, joining our respective forces to offer investors world-class private equity and ESG expertise as well as the opportunity to participate in the change they want to see in the world,” said Nils Bolmstrand, CEO of Nordea AM. Trill Impact’s fund advisory committee includes the Fourth and Sixth Swedish National Pension funds (AP4 and AP6), Allianz Global Investors and New York Life Insurance Company. “My ambition for Trill Impact since inception has been to create a thought leader and force for positive change through impact investments, enabling like-minded investors to actively contribute to a better world and inspiring others to follow. I am convinced that, together with Nordea Asset Management and the fund’s investors, we have now laid the foundation for future success,” said Jan Ståhlberg, Founder of Trill Impact.

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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