Fund Solutions

This Week’s Fund News: UK’s Brunel Aligns £3 billion to Paris

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Brunel Pension Partnership, BlackRock, Willis Towers Watson, ThomasLloyd, HSBC and SparkChange. 

The Brunel Pension Partnership, a local government pension scheme pool, has transitioned over £3 billion of passive investments to the new FTSE Russell Paris-aligned benchmark series it helped to co-develop. The Brunel passive equity funds that are now adopting the benchmarks are managed by Legal and General Investment Management. Five client members of the partnership switched their passive fund allocations to the new benchmark series, which aims to harness climate-related data in order to provide a climate-linked tilt exposure for Paris-alignment. The five client pension funds are: Wiltshire Pension Fund, Environmental Agency Pension Fund, Devon Pension Fund, Avon Pension Fund and the Oxfordshire Pension Fund. “When the Environment Agency Pension Fund set its net zero target of 2045, we made Paris-aligned benchmarks a central part of that. The days of investors blindly following the market are gone. This index will revolutionise passive investing and we are delighted to be part of a partnership driving such positive change in the market,” said Robert Gould, Chair of the Pensions Committee for the fund. FTSE Russell’s Paris-aligned benchmark series meets the minimum requirements of the EU’s Paris-aligned benchmark criteria, halving carbon emissions over a ten-year period and integrating forward-looking metrics and governance protections from the Transition Pathway Initiative (TPI). “The transition of £3 billion to the new Paris-aligned benchmarks is an indication of how indices can be a major part of the solution to climate change. Crucially, these indices harness the data we already have, including forward-looking metrics, not least TPI metrics. But they are also flexible enough to change in the future, as the data continues to improve,” said Faith Ward, Chief Responsible Investment Officer for the Brunel Pension Partnership.

BlackRock, the world’s largest asset manager, has fundraised US$673 million for the Climate Finance Partnership (CFP), a flagship public-private finance vehicle that aims to invest in climate infrastructure across emerging markets to accelerate the transition to net zero. “This partnership is proof that governments, philanthropic organisations, and institutional investors can come together to mobilise capital at scale into emerging markets, which are most exposed to the impact of climate change. My hope is that leaders across all segments of society will embrace bold, innovative solutions to help meet the climate financing gap,” said Larry Fink, BlackRock CEO. The capital has been raised by a global consortium of 22 investors spanning governments, philanthropies and institutional investors, exceeding BlackRock’s original US$500 million target. CFP will target investments in developing countries across Asia, Latin America and Africa, as these regions represent significant investment opportunities in climate infrastructure for investors. “We are excited to work with BlackRock and the CFP as it offers the ability to diversify our portfolio for sustainable infrastructure investments in emerging markets with a blended finance structure, while meeting our sustainability goals,” said Helena Olin, Head of Real Assets at Swedish public pension fund AP2, which contributed to the fundraising.

Willis Towers Watson’s (WTW) defined contribution master trust, LifeSight, is investing almost US$1 billion in WTW’s Climate Transition Index (CTI) fund to mobile finance towards its climate goals. “We believe that achieving the goals of the Paris agreement are clearly in the direct financial interests of our members, so our investment in the CTI fund enables our members to benefit from the additional value created by organisations that are best placed to benefit from the transition to a low carbon economy,” said Fiona Matthews, Managing Director at LifeSight. Tracking the STOXX WTW CTI, which conducts a forward-looking and bottom-up evaluation of transition risks and opportunity within each company, investors in the CTI fund can manage climate transition risks within their mainstream portfolios and support net zero alignment. “The fund provides a robust framework for quantifying and incorporating the financial impact of climate risk and is designed to provide investors with greater exposure to those organisations that are most likely to benefit from the climate transition and reduced exposure to those that are ill-prepared,” said Craig Baker, Global CIO at WTW.

ThomasLloyd Group’s new Energy Impact Trust (TLEI), a closed-ended investment company, has announced plans to launch an initial public offering to raise US$340 million. TLEI will invest in a diversified portfolio of unlisted sustainable energy infrastructure assets in emerging economies across Asia. These could include renewable power generation, transmission infrastructure, energy storage and sustainable fuel production. “The ThomasLloyd Energy Impact Trust is an agent for urgent change, focused on delivering sustainable energy infrastructure in fast-growing Asian markets. Demand for energy in Asia is profound and set to rise in the coming decades. Asia is home to 60% of the world’s population and the challenge of CO2 emissions in Asia is becoming ever more pressing. Investing as usual will not get us to net zero,” said TLEI Chair Sue Inglis.

HSBC has launched a £500 million Green SME Fund to help businesses of all sizes in their transition to a low-carbon economy. The UK-focused fund will be available for businesses with a turnover of less than £25 million, offering 1% cashback on loans to help SMEs invest in green activities. To qualify for the cashback, businesses must provide evidence that use of the loan proceeds will meet HSBC’s ‘Eligible Criteria for Green Activities’, which have been independently reviewed by Sustainalytics. “Companies of all sizes and sectors have a role to play in the journey to net zero, however the sustainable finance market has been predominately focused on larger corporations. It’s critical that access to funds isn’t a barrier for small and medium sized businesses working to achieve lower carbon emissions,” said Ian Stuart, CEO of HSBC UK. This follows the bank’s global commitment to provide between US$750 billion to US$1 trillion of financing and investment to support its customers over the next decade as they transition.

Climate technology company SparkChange has partnered with HANetf to launch the SparkChange Physical Carbon EUA ETC (SparkChange CO2), a physically-backed carbon exchange-traded commodity (ETC). SparkChange CO2 tracks the price of EU Carbon Allowances (EUAs), offering investors exposure to these carbon permits without having to build the infrastructure required to access the market directly. This means that each unit of SparkChange CO2 is physically backed by one EUA. EUAs held within the ETC cannot be used by polluters. “Carbon is now a physically-backed, investible instrument on the stock exchange. This gives investors convenient access to a product that is designed to stop carbon emissions and boost returns. Unlike carbon offsets, where investors must choose between creating environmental impact or achieving returns, they can now do both. When constructing a low-carbon portfolio, SparkChange CO2 can help investors meet their environmental goals without having to exclude companies that are not yet green,” said Elliot Waxman, SparkChange CEO.

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