Fund Solutions

This Week’s Fund News: Invesco Launches High Yield Bond ESG ETF

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Invesco, Octopus Investments, Patrizia, Mitsui, NextEnergy Capital, Big Issue Invest and Shift.  

Invesco, a multinational investment management firm, has launched a global high yield ESG ETF, the Invesco Global High Yield Corporate Bond ESG UCITS ETF. The ETF looks to track the Bloomberg MSCI Global High Yield Liquid Corporate ESG Weighted SRI Bond Index, which incorporates both exclusionary filters and tilting to overweight issuers with a strong ESG profile. Securities are excluded from the index if they have an MSCI ESG rating below BB or no rating, faced “very severe controversies” over ESG-related issues in the last three years, or are involved sectors including thermal coal, tobacco, unconventional oil and gas, or weapons. The eligible component securities are then each assigned an ESG score using MSCI ESG metrics, with this score then applied to re-weight the eligible securities from their natural weights as a result of the notional size of the bond. 

UK-based investment manager Octopus Investments has launched its UK Affordable Housing strategy for institutional investors. The strategy will target initial commitments of between £200-£300 million across multiple closes in 2023, with the goal of delivering affordable homes to address the ongoing housing crisis. Octopus has acquired a registered provider (RP) of social housing and will operate a scalable, direct let model, ensuring fair sharing of risk with its approved housing association partners, who will manage the properties on Octopus’ behalf. The acquisition of the RP ensures the strategy is subject to appropriate regulatory oversight, enabling the company to draw on grant funding to support the delivery of new homes. Octopus’ strategy will utilise a fully onshore, unlisted real estate investment trust structure to deliver long-term, transparent capital to the sector. The strategy will target index-linked income from the forward funding, acquisition, and long-term ownership of a portfolio of affordable homes across the UK, with co-investment opportunities available for investors such as local government pension schemes.  

Patrizia, a German global real assets investment fim, and Japanese trading and investment company Mitsui have launched a new Asia Pacific (APAC) Sustainable Infrastructure Fund. The APAC Sustainable Infrastructure Fund (A-SIF) reached its first close with US$110 million equity, targeting a total of US$500 million to US$1 billion. A-SIF is one of the largest active funds dedicated to investing in sustainable mid-market infrastructure across APAC, and the second infrastructure fund from the Patrizia-Mitsui joint venture. It will invest in developed markets across APAC, including Australia, Japan, Singapore and South Korea, aiming to build a diversified portfolio of sustainable assets, aligned with globally established ESG principles. The fund will primarily focus on mid-market brownfield opportunities in the four core sectors of energy (50%), digital (20%), social (20%) and mobility (10%), with target assets, including solar and wind farms, battery storage, sea cables, and EV charging stations.  

Global solar specialist NextEnergy Capital (NEC) has launched a private Organisation for Economic Co-operation and Development (OECD) international solar strategy, the NextPower V ESG (NPV ESG). The NPV ESG will target US$1.5 billion in capital commitments with a US$2 billion ceiling, with the strategy being NEC’s fifth investment vehicle focused on the solar sector. It will look to offer investors with risk-adjusted returns from the solar PV infrastructure asset class, targeting mid double-digit returns while contributing to the decarbonisation of the power generation sector, reducing electricity prices and increasing energy security. The NPV ESG is a 10-year closed ended vehicle that qualifies as an Article 9 Fund under the EU SFDR, and will primarily invest in OECD solar assets and adjacent technologies, such as energy storage, through focusing on geographies in which NEC has already built an operating presence. NEC’s previous OECD solar strategy NPIII ESG reached its final close in January 2022, raising US$896 million in total commitments.  

New investors have joined a social impact investment fund by investment company Big Issue Invest (BII), charity UnLtd and financial consultancy firm Shift. The additional backers include Big Society Capital, the University of Edinburgh, Scope and the Joseph Rowntree Foundation, joining the Bank of America and Access – the Foundation for Social Investment who were announced last year. The fund is aimed at social enterprises and organisations from underrepresented backgrounds, looking to tackle inequality and promote racial justice by being built around the needs of entrepreneurs historically locked out of social investment. The fund reached its first close with £8.2 million as it targets a total of £25 million. The fund requires that over 75% of the board and 50% of the management team of each social business should identify as at least one of the inclusion groups: women, disabled people; Black, Asian, minoritised ethnic, Gypsy, Roma, or Traveller; LGBTQIA+; have direct lived experience of the social issues the social business is focused on or have experienced socio-economic disadvantage.  

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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