Fund Solutions

This Week’s Fund News: Vanguard Launches ESG-focused ETFs

ESG Investor’s weekly round-up of news about funds designed to meet sustainable investing criteria, including Vanguard, MEAG, Earth Capital, SUSI Partners, Actis, INVL and FSF. 

US-based asset manager Vanguard has announced the launch of two new ESG focused ETFs. The Vanguard ESG Developed Europe All Cap UCITS ETF tracks the FTSE Developed Europe All Cap Choice Index, aiming to provide exposure to large, mid and small-cap stocks in developed European countries. The Vanguard ESG North America All Cap UCITS ETF tracks the FTSE North America All Cap Choice Index aims to do the same for different sized stocks in the USA and Canada. Vanguard’s exclusionary ESG funds track benchmarks derived from commonly used and available market capitalisation weighted indices, provided by independent benchmark providers. These providers give a weighted exposure to large, medium and small companies in the relevant target markets, applying ESG screening criteria to avoid or reduce exposure to industries such as firearms, tobacco and fossil fuels. The two new ETFs will be managed by Vanguard’s Equity Index Group, which manages more than US$4.8 trillion in assets globally. Fong Yee Chan, Vanguard’s Head of UK and Europe ESG strategy, said: “Today’s launches are the start of the next stage in that commitment; building out our suite of ‘building block; ESG ETFs, designed to help investors construct ESG ETF portfolios for the long-term, at a low cost.”  

MEAG, a German assert manager with €309 billion in AUM, has issued its first infrastructure equity fund: the MEAG European Infrastructure One (MEIO) investment fund. It aims to enable non-group institutional investors to make equity investments in infrastructure alongside investors from the Munich Re Group for the first time. The MEIO investment fund is labelled as Article 8 under the EU’s Sustainable Finance Disclosure Regulation (SFDR) and will look to complement MEAG’s existing debt offering in the infrastructure field, investing in the transformation of the energy industry, sustainable transport, digital infrastructure and other “essential infrastructure topics”. Frank Becker, MEAG’s Managing Director, said: “For the first time, we are now also enabling institutional investors from outside the group to participate in the sustainable long-term growth of this asset class, using our risk-based investment approach.”  

UK-based growth equity impact investor Earth Capital Limited (ECL) has launched Sustainable Energy Holdings Limited (SEHL), a new company formed from a merger of four of its portfolio companies. Eccleshall Biomass, Limelight Energy, Black Dog Biogas and Bright Light Energy have merged to ensure their UK-based biomass-fuelled renewable energy plants will benefit from a single management team focusing on operational performance and consolidating commercial and financial functions. These facilities will generate a total of 3.89 megawatts (MW) of base renewable energy, which ECL says will be enough to avoid 5,000 tonnes of carbon dioxide emissions and power up to 9,000 homes. SEHL aims to improve performance in the medium-term through additions to the platform’s asst base using a build-to-buy strategy which will include the acquisition and development of new plants and the improvement of existing assets. Avent Bezuidenhoudt, ECL’s Director and Head of Investment, said: “The establishment of this platform demonstrates how growth equity can find and finance appealing renewable energy solutions while also delivering a range of benefits to local and national stakeholders.”  

SUSI Partners, a Swiss fund manager with €1.7 billion in capital commitments, has acquired a 100-megawatt US battery storage portfolio. The portfolio of front-of-the-meter battery storage systems comprises ten ready-to-build projects with a capacity of 10 MW located across South Texas. SUSI has partnered with SMT Energy on the portfolio, with its assets expected to start commercial operation in H1 2023, alleviating pressure on power grids in the region by balancing mismatches in electricity supply and demand. The transaction is SUSI’s second in the US battery storage market, following its 2019 investment in a behind-the-meter portfolio of Californian assets through its energy storage fund. It is also the first battery storage deal executed through SUSI’s flagship energy transition fund SETF, with SETF’s portfolio now covering investments from renewable energy production over energy efficiency to energy storage and integrated customer energy solutions following this transaction.  

Sustainable infrastructure investor Actis has announced the acquisition of a majority stake in Levanta Renewables, a Southest Asia renewables platform. The investment is Actis Energy Infrastructure’s first in Vietnam, supporting the country’s carbon neutral commitments. Levanta has 300 MW of onshore wind power projects in advanced developments, with Actis planning on applying its buy-and-build strategy to scale the business into a 1.5 gigawatt (GW) renewable platform across Southeast Asia. Actis’ sustainability team will work in partnership with Levanta to establish ESG standards across the business and will report on positive impact using Actis Impact Score, Actis’ proprietary framework measuring the positive social and environmental impacts of its investments. Rahul Agrawal, Director Energy Infrastructure at Actis said: “We are excited to be making our first Energy Infrastructure investment in Vietnam, a country which leads the way in Southeast Asia for renewable energy deployment and which has committed to Net-Zero by 2050.” Actis has also acquired a stake in Omega Energia, Latin America’s largest listed pure-play renewable energy generation company. Omega has been operating in the Brazilian renewable energy space for a decade, building, operating and acquiring solar, hydro and wind projects across the country. The company has seen seven-fold growth since its IPO in 2017, with an operating capacity of 1.9 GW. This acquisition is Actis’ first Energy 5 investment in the Americas. 

Baltic investment management group INVL’s Sustainable Timberland and Farmland Fund II (STAFF II) has raised an additional €22.9 million in its fourth fundraising round with investors. The fund invests in sustainable forest and land in the Baltic Sea, Central and Eastern European regions. Martynas Samulionis, STAFF II’s Managing Partner, said: “The capital raised from investors demonstrates their trust in our strategy and enables STAFF II to explore additional market opportunities to put the assets entrusted to us to work to achieve greater growth and returns. We continue to look for more acquisition targets in the Baltic region as well as in countries across Central and Eastern Europe.” INVL’s STAFF II also acquired 1,184 hectares of land in Latvia, made up of 635 hectares of forest and 424 of agricultural land. Samulionis said: “The assets targeted are those with high potential for commercial forestry and good farmland which STAFF II can look to develop sustainably. We plan to hold these assets for a very long time and subsequently provide our investors with a strong and sustainable long-term return on their commitment.” 

Foresight Sustainable Forestry (FSF), a UK-based investment firm, has completed the acquisition of three afforestation properties in Scotland for £3.4 million. With these acquisitions, FSF achieves its IPO target of 40% afforestation, expanding the total area of FSF’s portfolio to 8,966 hectares. The three properties, Ness Bogie (128.6 hectares), Ream’s Hill (37.6 hectares), and Brown Hill (30.8 hectares), are all located within approximately four miles of each other and encompass a total area of 197 hectares. The FSF has also successfully completed planting at Mountmill Burn, an afforestation project with approximately 245,000 trees. With a forecasted production of over 44,600 tonnes of sustainable timber each 35-year rotation, this project is forecast to not materially negatively impact upon the site’s high baseline biodiversity score. It will significantly extend and improve the habitat for Northern Brown Argus butterflies, which are recognised as a ‘Priority Species’ by the UK Biodiversity Action Plan (“BAP”). The project will also sequester 19,794 tonnes of additional carbon dioxide from the atmosphere. Richard Kelly and Robert Guest, FSF’s Co-Heads, said: “We are delighted to have achieved another major IPO objective of having 40% of the value of the portfolio allocated to afforestation. The completion of planting at Mountmill Burn represents the second property that has reached planting completion and we have a further 19 afforestation properties still under development.” 

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