Fund Solutions

This Week’s Fund News: iShares US$9 billion ESG Range Adopts Climate Benchmark

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including BlackRock, UOB, Storebrand AM, AMX, Aegon, GFFI, and Invesco. 

BlackRock is to incorporate the Climate Transition Benchmark (CTB) into its iShares ESG Enhanced UCITS ETF range. It will become the largest climate-aligned ETF range with over US$9 billion in AUM across six funds. The CTB benchmark was introduced by the European Union in April 2020, following a consultation with market participants. The benchmark is aligned to a 1.5ºC warming trajectory and requires a 30% carbon intensity reduction versus the parent index and a 7% year-on-year decarbonisation of the benchmark itself. The carbon intensity requirements incorporate Scope 3 carbon emissions for the first time. The new business screens include the introduction of an environmental harm screen from the end of November 2022. There is also an upgrade of the current oil sands screen to an unconventional oil and gas screen. SFDR classification of the fund range will change on 1 December 2021 from Article 8 to Article 9. The upgraded methodology will comply with BVI, the German Investment Funds Association, sustainable taxonomy requirements from 1 December 2021.

StoreBrand Asset Management in partnership with AMX has launched a tax-transparent sustainable strategy that targets climate risk. The goal is to provide better outcomes for pension funds across the EMEA area. AMX Storebrand Global ESG Plus is a fossil-free equity strategy that aims for long-term alignment with the Paris Agreement goals and demonstrates lower carbon risk with better climate solutions and ESG scores than the global index. The tax-transparent structure of the fund allows Storebrand, Norway’s largest asset manager, to offer its sustainable strategy to UK pension funds and other large European investors while assuring tax reclaims are being correctly administered in the different countries they are invested. The AMX Storebrand Global ESG Plus fund has attracted investors such as the East Sussex Pension Fund (ESPF), a local UK government pension scheme, and additional commitments from institutions that are in the process of funding.

Invesco has launched its third ETF with the first Nasdaq ETF in Europe. The Invesco Nasdaq-100 ESG UCITS ETF (NESG) is the only ETF in Europe providing access to an ESG-enhanced version of Nasdaq’s benchmark. Within the ETF, companies are evaluated and weighted on the basis of their business activities, controversies and ESG Risk Ratings from Sustainalytics, a Morningstar company. NESG gives investors access to the largest non-financial companies on the Nasdaq exchange with investment exposure tilted to fundamental values. In March 2021, Invesco launched its Nasdaq Next Generation 100 UCITS ETF and a swaps-based version of the flagship EQQQ Nasdaq-100 UCITS ETF, which was launched in 2002 and now has US$6.3 billion of assets under management. Constituents are filtered through a Sustainalytics ESG model that weights companies based on how effectively they are managing ESG risk, rewarding those with a lower risk. Only six stocks were removed from the parent index in the latest reconstruction, but the weighting methodology improved the already low ESG Risk Rating by 10%.

The first fund aimed at helping individual and institutional investors contribute to Singapore’s sustainability drive has been launched by UOB Asset Management (UOBAM). The United Smart Sustainable Singapore Bond Fund is part of a Singapore government plan to finance up to S$19 billion of public sector infrastructure projects through green bond issuances. The fund invests its assets in green, social, sustainability and sustainability-linked bonds with ESG mandates. Most of the assets are allocated to bonds in Singapore. The fund’s investment themes, namely ‘Green, Clean and Smart Singapore’, ‘Preparing for Climate Change’ and ‘Sustainable Production’, aim to support the country’s green development plans. The fund’s portfolio is also allocated to corporate bond assets based across Asia. The investment approach of the fund is based on UOBAM’s ESG rating model. It combines ESG data from third-party providers such as MSCI and S&P Global Trucost with UOBAM’s analysis and materiality framework. The model also taps artificial intelligence and machine learning in the evaluation process, including the monitoring of companies’ news, to derive more robust ESG scores.

A new Aegon Asset Management fund to be launched at COP 26 will be seeded with £100 million from the Aegon UK. The Hague-based Aegon have partnered with the Global Ethical Finance Initiative (GEFI) to introduce the Aegon Global Sustainable Sovereign Bond Fund. The fund, which incorporates the sustainability characteristics of sovereign bonds into an investment strategy, will be available to those saving through their workplace pension as it becomes a component of Aegon UK’s Universal Balanced Collection. This is widely used as a scheme default fund. The fund will also be available directly through Aegon Asset Management, subject to completion of registrations. GEFI is a Scotland-based organisation focused on driving change in the finance community to deliver more private sector capital into the UN’s Sustainable Development Goals (SDGs). GEFI will launch its SDG Financial Products Platform at COP26 and is the result of a collaboration between GEFI and the United Nations Development Programme to build financial products aligned to the UN’s Sustainable Development Goals. The platform works with partners to build the ecosystem of SDG aligned financial products across asset classes. The platform only works with financial institutions that demonstrate a genuine commitment to the 2030 SDG agenda.

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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