Fund Solutions

This Week’s Fund News: Public-Private Investors Commit Cash at COP26

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Swiss Re, BPF, BTNZ, L&G, Infracapital and Idemitsu.

COP26 has seen a slew of new investment commitments from governments and public and private financial institutions around the world to mitigate the effects of climate change. The Adaptation Fund, which finances projects and programmes that help vulnerable communities in developing countries adapt to climate change, received US$351.6 million in investments from 15 national and regional governments. The fund’s previous fundraising record was US$129 million during COP24 in Katowice, Poland. Also hoping to help developing countries mitigate the effects of climate change, 12 governments pledged US$413 million to the Least Developed Countries Fund (LDCF). Countries that invested in the fund include Belgium, the Netherlands, France, Germany and the US. The LDCF is a dedicated source of climate resilience funds for the 46 least developed countries in the world. Latin America and the Caribbean received their first blue bond. IDB Invest issued the A$50 million, 10-year fixed-rate bond, which will support projects expanding access to clean water and sanitation for people across the region. US$145 million has also been invested in the Global Funds for Coral Reefs, including US$125 million from the UN’s Green Climate Fund. This will be used to help small island states protect and restore coral reefs while building coastal resilience and adapting to the impacts of climate change. Public and private financial institutions have committed almost US$13 million to the Ocean Risk and Resilience Action Alliance, which aims to incentivise investment in nature-based solutions for coastal and marine areas. Further, over two dozen countries and foundations have pledged US$1.7 billion to support indigenous peoples and local communities between 2021 and 2025. The capital will go towards advancing forest tenure rights and recognising their role as guardians of forests and nature.

The Swiss Re Foundation and the UK’s Blue Planet Fund (BPF) have together invested over US$500 million in the Ocean Resilience Innovation Challenge. Led by the Ocean Risk and Resilience Action Alliance (ORRAA), the initiative aims to support community-led financial solutions designed to reduce biodiversity-related risks. The capital provided by Swiss Re and BPF will support the Challenge over the next two years, enabling ORRAA and its partners to mentor the winning projects and maximise their impact and future investment potential. “The UK and Swiss Re Foundation’s backing of the Ocean Resilience Innovation Challenge comes amidst a growing urgency for private and public finance leaders to increase ocean finance commitments and build resilience in some of the Earth’s most valuable ecosystems and most exposed communities. This is about how we nurture and scale locally-led solutions to some of the most serious challenges we face,” said Karen Sack, Co-Chair of the ORRAA.

Bank Westpac NZ’s BT Funds Management NZ (BTNZ), which covers its national pension scheme KiwiSaver and managed fund arm, has partnered with Legal and General (L&G) to develop and implement its climate investment strategy. The strategy aims to ensure a tangible reduction in greenhouse gas (GHG) emissions for New Zealand-based investors, halving emissions at the outset. “BTNZ chose L&G because of their recognised leadership in this area. L&G receives widespread industry recognition when it comes to sustainable investing. It is known for taking a proactive approach to tackling climate change and other ESG matters, and for vocally engaging with and encouraging companies that aren’t making good progress to improve their performance,” said Philip Houghton-Brown, Head of Investment Solutions at BTNZ.

Infracapital, the infrastructure team at M&G, has announced the final close of its greenfield infrastructure investment strategy, having raised €1.5 billion from a global investor base. Aiming to invest in sustainable infrastructure across Europe, over 50% of this capital is already allocated to companies that are delivering on the energy transition or improving digital connectivity. “Growing businesses that are playing an important role in combating climate change or are enabling the digital revolution demonstrates how institutional capital can be carefully deployed to the benefit of society as a whole, as well as seeking to generate investment returns for pension funds and other like-minded institutions,” said Jack Daniels, CIO of M&G. Existing investors in the strategy include Prudential’s With Profits Fund, which provided over 75% of the capital raised during this round. “Infracapital has been investing in infrastructure for 20 years and the need for sustainable, essential infrastructure across Europe has never been greater, particularly in a post-pandemic world, where private capital will play a critical role in supporting economies and delivering on net zero commitments,” said Martin Lennon, Co-Founder of Infracapital.

Idemitsu Kosan, a Japanese energy supplier, has invested US$25 million in the Azimuth V Energy Evolution Fund, which has been established by Azimuth Capital Management. By investing in the fund, Idemitsu aims to better collaborate with portfolio companies that promote the development and use of clean energy. “This investment will be a major driving force in the Idemitsu Group’s transition to a sustainable business structure. Also, the Fund and the companies it invests in will be able to significantly increase their value by leveraging our business assets,” said Motohiro Suzuki, President and CEO of Idemitsu Group. The fund targets technology-enhanced energy investment opportunities that materially lower carbon emissions in the production of energy and fuels. “Idemitsu is a respected energy industry leader not only in Japan but around the world. With real carbon mitigation benchmarks by which the success will be judged, the Azimuth V Energy Evolution Fund [aims to be] positively differentiated from other groups flooding the market,” said Jeff van Steenbergen, Co-Founder of Azimuth.

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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