Fund Solutions

This Week’s Fund News: Invesco ESG ETF Suite Prioritises Paris Alignment

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Invesco, Vanguard, WisdomTree, Stewart Investors, Orestes, Orange, Mirova and UK Climate Investments.

Invesco has launched a suite of ETFs combining ESG criteria with Paris aligned climate objectives. They will track MSCI indices that aim to reduce exposure to physical climate risks while simultaneously pursuing opportunities arising from the transition to a low-carbon economy and aligning with the Paris Agreement’s temperature goals. Each index also implements a broad set of exclusions. “Responsible investors are not all the same, and we are creating a range of solutions to meet different objectives and investor priorities,” said Chris Mellor, Head of EMEA Equity at Invesco. “These ETFs aim to strike a balance between specific climate and broader ESG objectives, with a risk-return profile that most investors would expect from a core portfolio holding.” The ETFs will be invested physically in the securities of the respective MSCI indices and Invesco will be exercising its proxy voting rights, guided by the firm’s ESG team as it engages with investee companies on ESG-related issues. Offering a choice of exposure to the USA, Europe, Japan and world equity markets, the firm also plans to add emerging markets to the range in due course. “As world leaders initiate plans to slow global warming, companies are key to success. They will need to reduce their carbon footprints while many will also create products and services to help us all improve ours. This new range of ETFs offer investors an efficient way to focus on companies with lower climate-related risks and positive exposure to the transition, while meeting broader ESG objectives,” said Gary Buxton, Head of EMEA ETFs and Index Strategies at Invesco.

For investors looking to achieve sustainable returns, Vanguard is now offering four sustainable actively-managed funds with its Vanguard SustainableLife range. The SustainableLife 60-70% Equity, 80-90% Equity and 80-90% Equity funds invest in equities and bonds globally, managed by Wellington Management. They will follow four sustainability principles: a commitment to net zero greenhouse gas (GHG) emissions by 2050; exclusion of companies that may have a negative impact on society and the environment; engage with portfolio companies on key ESG issues; and require companies to follow good governance practices as a precondition for investment. The fourth fund launched by Vanguard is the Global Sustainable Equity Fund, also to be managed by Wellington, which will incorporate sustainable investment criteria to align with investor values and reduce exposure to ESG-related risks. “We integrate ESG considerations into our investment processes and product design in three key ways. We engage with the companies in which we invest through our investment stewardship activities. We offer funds that allow investors to avoid certain ESG risks, and, thirdly, we allocate capital to companies based on certain sustainability criteria in our new actively managed funds, with the aim to outperform the market,” said Fong Yee Chan, Head of ESG Strategy in Europe at Vanguard.

WisdomTree has expanded its Thematics UCITS range with the BioRevolution ETF. The fund will track the WisdomTree BioRevolution ESG Screen Index, offering investors access to firms associated with BioRevolution activities through investment in publicly-listed companies. These companies are expected to help transform and advance genetics and biotechnology and must meet WisdomTree’s ESG criteria. “The biology revolution is creating a historic investment opportunity equivalent to the industrial and internet revolutions. Advancements in biotechnology could represent the greatest innovations of our lifetime. The biology revolution has huge potential to address and mitigate some of the most pressing challenges facing humanity today whether that be climate change, food scarcity or controlling diseases and pandemics. New and transformative innovations could have a profound impact on society and the environment, improving the quality of life for many,” said Chris Gannatti, Global Head of Research at WisdomTree.

Stewart Investors’ Sustainable Funds Group (SFG), an active equity specialist, has launched a Global Emerging Markets (GEM) Leaders Sustainability Fund for UK-based investors. It will invest in mid- to large-cap companies that are considered to be well-positioned to contribute to sustainable development while delivering long-term capital growth. “Having a strong focus on sustainability, in particular looking at companies’ stewardship and how they treat all stakeholders, is crucial in identifying the best long-term opportunities in emerging markets. Our bottom-up approach, as well as a long-term time horizon and regular engagement with our portfolio companies, allow us to identify and invest in quality companies with sustainability tailwinds,” said Jack Nelson, Portfolio Manager at Stewart Investors’ SFG.

Orestes Ethical Equity has appointed Sustainable Capital, a bond issuance platform, and Bedford Row Capital, a global non-bank structuring specialist, to launch an ethical equity portfolio with a £50 million AUM target. It will invest in equities of companies that are listed, quoted or traded on global markets across currencies and industry sectors. Orestes aims to locate long-term sustainable growth prospects that contribute to the UN Sustainable Development Goals (SDGs). Prospective investments will be assessed on their degree of ethicality according to negative screening criteria and will need to achieve a required score from a proprietary assessment tool. The pre-trade screening will be carried out by ethical advisory firm Yasaar Limited. “Orestes Ethical Equity prepares for the post-COP26 and SDG focused world through its ethically driven investment process. The flexibility of the portfolio also allows for diversification and adaptability to different market conditions and upcoming yet uncertain regulatory changes. Impact investing can also benefit investors as they have lower volatility, align to personal values and add transparency to investments,” said Dr Scott Levy, CEO at Bedford Row Capital.

Telecoms company Orange has launched a carbon fund to finance reforestation and ecological restoration projects. Launched with asset manager Mirova, the €50 million Orange Nature Fund furthers the company’s net zero by 2040 environmental strategy by investing in carbon sequestration projects around the world. Investment decisions will also account for the economic and social development of the regions and populations affected by the projects, as well as the positive impacts they may have on the region’s biodiversity. “Ambitious commitments of corporates, when well framed and designed, can become powerful contributors to a net zero economy,” said Anne-Laurence Roucher, Deputy CEO of Mirova.

UK Climate Investments has committed £15 million of additional funding to support the Revego Fund Managers Africa Energy portoflio’s long-term growth and aims to further mobilise private finance flows in support of South Africa’s clean energy transition. Revego aims to help build a new ecosystem for clean electricity generation by acquiring equity in operational renewable energy projects. Earlier this year, alongside Investec Bank, Eskom Pension and Provident Fund, UK Climate Investments initially committed £25 million to establishing Africa’s first dedicated renewable energy yieldco, managed by Revego. The additional funding will help Revego scale its growth. UK Climate Investments is a joint venture between Macquarie’s Green Investment Group and the UK government’s Department for Business, Energy and Industrial Strategy.

 

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