ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Scottish Widows, BlackRock, Goldman Sachs AM, Essex Pension Fund, UBS AM, HSBC AM, Downing, and Lightrock.
UK retirement savings provider Scottish Widows has invested £500 million in US asset manager BlackRock’s newly launched BlackRock Corporate ESG Insights Bond Fund. The second fund BlackRock has built in consultation with Scottish Widows, it looks to provide broad-based exposure to global investment-grade bonds, whilst seeking to “achieve certain ESG related aims”. The fund is managed by BlackRock’s Index Fixed Income portfolio management team to achieve returns similar to the Bloomberg Global Aggregate Corporate Index GBP Hedged, but targeting a carbon emissions intensity score 50% less than the index. The strategy screens out companies involved in activities relating to thermal coal and tar sands; tobacco; violators of the UN Global Compact Principles; and controversial weapons, as well as companies connected with nuclear weapons or involved in the production of civilian firearms. Maria Nazarova-Doyle, Scottish Widows’ Head of Pension Investments and Responsible Investments, said: “Working on the creation of these specially tailored funds to drive innovation in ESG investing [means] we can help more capital flow into climate-aware investment strategies and contribute to pension schemes having greater choice when it comes to responsible investments.”
Goldman Sachs Asset Management has launched the Goldman Sachs Paris-Aligned Climate World Equity UCITS ETF. The fund looks to provide results close to the performance of the Solactive ISS ESG Developed Markets Paris-Aligned Benchmark (PAB) USD Index, which is comprised of global developed market equities and is constructed to meet the minimum requirements for EU PABs. The fund aims to help investors to manage climate transition risks by “shifting exposure away from companies or industries that have business models that are inconsistent with a low carbon future”. As well as excluding certain sectors and targeting an overall emissions intensity 50% lower than the parent index, PAB minimum standards require companies within the Index to show a 7% year-over-year reduction in carbon emissions intensity. Peter Thompson, Goldman Sachs Asset Management’s European ETF business Head, said: “We are excited to introduce the Goldman Sachs Paris-Aligned Climate World Equity UCITS ETF, which can contribute towards our clients’ portfolio construction and responsible investing objectives. We look forward to bringing further ETFs with ESG and sustainable characteristics to the market as we continue to expand our ETF offering to European clients.”
Essex Pension Fund, a UK Local Government Pension Scheme with £6 billion AUM, has partnered with UBS Asset Management and consultancy firm Hymans Robertson to launch the UBS Life Global Equity Sustainable Transition fund. The fund will be available to the wider UK institutional pensions market and will invest in companies that are well-positioned for the transition to a low-carbon economy. The fund aims to deliver returns broadly in line with the global developed equity markets with better exposure (compared to the FTSE Developed Index benchmark) to metrics measuring the expected contribution of companies to climate change, overall ESG scores, and alignment with five UN Sustainable Development Goals (SDGs). These are good health, affordable clean energy, decent work and economic growth, responsible production and consumption, and climate action. Simon Jones, Head of Responsible Investment at Hymans Robertson, said: “Being responsible stewards of the monies in their care is a key consideration for all our clients. In an area that is particularly fast-moving, it is vital that investors regularly review their approach to integrating responsible investment considerations and we look forward to continuing to work with both Essex Pension Fund and UBS Asset Management in future.”
HSBC Asset Management has followed up on its £1 billion HSBC Sterling ESG Fund with the launch of a new ESG money market fund, the HSBC US Dollar ESG Liquidity Fund. The fund will invest in a portfolio of issuers that have an A1, P1 or F1 rating, or long-term equivalent, and that HSBC AM has identified as being demonstrably better at addressing ESG risks than other issuers in the investable universe. This will be achieved by applying “a robust ESG scoring system and relative ESG filters” appropriate for the money market investable universe. Issuer engagement will also be a key component of the fund’s approach, including a client change orientated engagement programme. HSBC AM will encourage issuers to address identified shortcomings in how they manage ESG risks, ensuring companies are aware that their ESG performance is factored into decisions on whether their short-term debt issuance is eligible to be purchased by the fund.
London-based sustainable investment manager Downing has created a new investment vehicle for the Human Capability Foundation (HCF) to invest into renewable energy assets. Downing’s energy and infrastructure team has previously completed nearly 200 renewable energy transactions and currently manages a portfolio valued at £785 million. Downing’s team will acquire and manage a renewable energy portfolio for HCF, with the goal of benefitting from long-term predictable revenue streams. The investment vehicle can also provide a regular and inflation-linked return that can be used to support HCF’s ongoing charitable purposes. Downing has worked closely with HCF to tailor the mandate of this new investment vehicle, which will also have an “inherent, positive” ESG impact. These assets are expected to include operational core renewables in the UK, which have longstanding track records and, in certain cases, receive government-backed and inflation-linked subsidies. Downing plans to launch similar investment vehicles for additional charities, foundations and endowments. Luke Pagarani, a HCF Trustee, said: “We selected Downing as the investment manager for this vehicle because of their expertise in sourcing and making new renewable energy investments. We also valued the quality of its in-house energy asset management team, which is responsible for the operational management of renewable energy assets across their wider portfolio.”
Lightrock, a London-based global private equity platform, has closed its inaugural Lightrock Climate Impact Fund (LCIF) at €860 million. The initial target size for the fund was €600 million, with Lightrock raising its hard cap in response to investor interest. The Article 9 fund will make initial investments of €10-40 million in growth-stage companies driving net zero innovation in Europe and North America. The fund may also include a modest allocation to early-stage companies, provided they have clear potential to emerge as leaders within the climate themes it invests across. The firm has already made seven investments in companies operating across its investment themes and meeting LCIF’s investment strategy. The close of this Fund follows a period of significant fundraising at Lightrock, with more than US$2 billion raised in little over a year. Pål Erik Sjåtil, Lightrock’s CEO and Global Managing Partner, said: “This is Lightrock’s third successful fund close in little over a year and it represents a resounding endorsement of our mission to scale impact investing.”