Asset manager PGIM’s new Better Future Fund will aim to invest in high growth companies where the “duration or magnitude” of their development is being underestimated. Managed by PGIM’s active equity manager, Jennison Associates, the thematic global equity portfolio will invest in firms aligned to a select group of UN Sustainable Development Goals. PGIM is the US$1.4 trillion global asset management subsidiary of American financial services provider Prudential Financial. The fund is classified as Article 8 under the EU Sustainable Finance Disclosure Regulation. The vehicle invests in companies that Jennison believes have “disruptive technologies or services” and demonstrate “dynamic new product development”. Through a bottom-up stock selection approach, the global portfolio has a concentration of 25-40 companies. “We are launching the Fund in response to strong demand from our international clients to continue to deliver long-term investment returns while contributing towards a more sustainable and inclusive world,” said Matt Shafer, Head of International Distribution at PGIM. “We believe that companies which address global challenges will experience rising demand for their products and services.”
Sustainable Investor
News in Brief
A group of nearly 100 institutional investors has issued a statement in support of comprehensive immigration reform, arguing this is necessary to foster economic stability and growth. The statement was in response to a recent flurry of executive orders made by US President Donald Trump that have prompted an increase in raids by the US Immigration and Customs Enforcement, as well as deportations and detentions of undocumented people. The group of investors said that this has created heightened anxiety and unpredictability that is negatively impacting markets. “Immigrants are an integral part of the rich and diverse tapestry that is America, and have contributed significantly to the workforce, and cultural and entrepreneurial spirit that defines this nation,” said New York City Comptroller Brad Lander. “Congress should act now, without delay, to pass the comprehensive and just immigration reform legislation needed to maintain a competitive edge in the global economy and ensure growth and sustainability across industries and sectors.” The unfair removal of immigrants will impact the US workforce, the statement said, noting that mass deportations would result in a GDP loss of between 1.2-7.4% below baseline by the end of 2028. “Immigrants help power our economy, and they are threaded throughout the workforces of nearly every sector and company either directly or via their supply chains,” said Lauren Compere, Head of Stewardship and Engagement at Boston Common Asset Management. “Comprehensive immigration reform will help, not harm, US businesses and the economy.”
Policy advocacy group Inclusive Development International has launched a new website that tracks more than US$39 billion in sustainable investments flowing into companies linked with harmful ESG practices. Called ESG Watch, the platform seeks to amplify the voices of communities affected by harmful corporate activities by ensuring that firms fulfil their human rights responsibilities. Inclusive Development International said that taking a stance against ‘ESG-washing’ is now more important than ever, as the European Commission waters down reporting obligations and the US rolls back key climate legislation. “The ESG investing industry needs to be held accountable to its human rights responsibilities, even as the very notion of responsible investing is under attack from the political right,” said David Pred, Inclusive Development International’s Executive Director. “Some asset managers may be retreating from ESG labeling and rhetoric amidst these attacks, but they will continue to cater to the significant consumer demand for responsible investing options, which isn’t going anywhere. We cannot let that demand be co-opted by false solutions – no matter how they are labeled.” Companies that have been identified as having poor ESG practices include fossil fuel and mining giants facing numerous human rights complaints, weapons manufacturers implicated in war crimes, and over a dozen companies that maintain business ties to Myanmar’s military junta.
South Korean regulators have published the results of their first climate-focused stress tests on banks and insurance companies. In a scenario where no action is taken to reduce emissions, the finance sector stands to lose ₩45.7 trillion (US$31.4 billion in climate-related losses by the start of next century, the regulators warned. The Financial Supervisory Service (FSS), Bank of Korea and Korea Meteorological Administration conducted joint analysis with 15 financial firms, conducting stress tests to figure out projected losses under four different scenarios: 1.5°C response, 2°C response, delayed action and no action. If South Korea achieves its zero-emission goals by 2050, financial firms’ total losses could be reduced to ₩26.9 trillion, they said. If no measures are taken to address climate risks, the total capital ratio of banks would fall by 3.8 percentage points, the regulators said. Meanwhile, the insurance sector’s K-ICS ratio would decrease by 2.9 percentage points by 2100. In response to the findings, the FSS plans to introduce transition finance guidance to encourage funding for companies that reduce their emissions.
UK-based pensions provider Scottish Widows has found that 69% of employers offer an option for a responsibly invested company pension, but only 44% have it as their default option. According to the Responsibly Invested Pensions Report, 17% employee classed the environmental or social impact of their pension as a top priority, with this rising to 25% among those aged 18-34. Three-in-five employers reported an increase in employees seeking to understand how sustainability is embedded in their pensions during the past year. However, 61% of employees do not know how to get their employers to install responsible investment as the default option for their pensions according to Scottish Widows’ research. Key concerns include a lack of clarity around costs and benefits (25%), doubts about comparable returns (23%), and general uncertainty of funds labelled as ‘responsible’ (20%). More than half (53%) of employers have allocated pensions to specific sustainable funds, 46% said they were invested in impact strategies and 45% are focused on investing in companies that are cutting carbon emissions. “Transparency is key; workers want assurance that their pensions are future-proof, both for their retirement and the future world they will retire into,” said Eva Cairns, Head of Responsible Investment at Scottish Widows. “Meanwhile, employers must demonstrate how they have considered responsible investment in their workplace offering, especially their default that the majority of employees will be in.” The report surveyed 4,712 employees and self-employed workers, 2,000 human resources decision-makers and 189 UK-based financial advisers.
Asset manager BlackRock has cut the term ‘ESG’ from 56 strategies comprising its iShares MSCI ESG Screened UCITS ETF range and BSF Systematic ESG World Equity Fund. Cumulatively these funds represent US$51 billion in AUM. The change has been made in response to the European Securities and Markets Authority’s (ESMA) fund naming guidelines, which come into effect on 21 May for existing funds. The rules are an attempt to limit greenwashing in Europe by ensuring the names of funds claiming positive sustainability-related outcomes accurately reflect their investment strategies, partly by imposing minimum thresholds on funds with specific sustainability-related terms in their titles. The guidelines have applied to new funds since last November. More than 1,000 EU-domiciled green funds are expected to change names over the next couple of months ahead of the May deadline. The ESMA guidelines are expected to serve as a stopgap measure ahead of a more expansive and far-reaching update to the Sustainable Finance Disclosure Regulation expected in Q4. In January, Autorité des Marchés Financiers, the French securities commission, updated its policy on fund names to align with ESMA’s guidelines. Sixty of BlackRock’s ‘dark green’ strategies, accounting for US$92 billion in AUM, will also start implementing Paris Aligned Benchmark exclusions.
Nordea Asset Management (NAM) has been selected by one of the largest public pension plans in France – Ircantec – to co-manage a decarbonisation-focused global equity mandate. With a target of €800 million (US$867.9 million), NAM will be partnering ODDO BHF Asset Management to pursue investment opportunities that contribute to Ircantec’s target of reducing its portfolio emissions by 7% a year. The customised active global equity solution is based on NAM’s BetaPlus Responsible Enhanced Equities Strategies. The mandate will be managed by NAM’s multi-assets team. “We are grateful for Ircantec’s trust in our longstanding BetaPlus capabilities, and we look forward to helping them progress toward a low-carbon future,” said Christophe Girondel, Global Head of Institutional and Wholesale Distribution at NAM. “The opportunities to support Ircantec in reaching their decarbonisation target underscores our commitment to aligning climate objectives with investment performance.” Caisse des Dépôts et Consignations, the French state-owned long-term investment and economic development institution, serves as Ircantec’s fiduciary manager and is responsible for selecting external asset managers to manage dedicated mandates.
Climate risks are not being accurately reflected in recent credit rating actions, according to the Institute for Energy Economics and Financial Analysis (IEEFA). Their impact on ratings is mitigated by the long-term nature of such risks, and the challenge of quantifying the impact within the short-term credit assessment framework. Other mitigating factors for carbon-intensive companies include government support, strong standalone financials and regulatory policies. While ESG scores introduced by rating agencies improve the transparency of how these risks are incorporated into credit assessments, IEEFA said that in most cases introducing these credit scores has not led to significant rating changes. In separate analysis focusing on the European oil and gas sector, the IEEFA argued that a longer view of the European oil and gas sector should be offered to help them rate the uncertainties caused by the energy transition. “Often limited by their relatively short horizon, credit ratings find it difficult to account for the risk of the oil and gas sector’s long-term decline, given the unclear timing and magnitude of the downturn,” said Kevin Leung, author of the study and Sustainable Finance Analyst at IEEFA.
Australia’s Federal Court has imposed a penalty of A$10.5 million (US$6.6 million) against superannuation fund Active Super for greenwashing in a case brought by the Australian Securities and Investments Commission (ASIC). ASIC initiated civil penalty proceedings against investment advisory LGSS Pty, as trustee of Active Super, in August 2023 saying it had engaged in greenwashing for failing to adhere to its commitments to eliminate investments that posed risks to the environment and the community, including gambling, coal mining and oil tar sands. The regulator also said Active Super retained holdings in Russian securities, despite representations that Russia was added to the list of excluded countries following the start of the war in Ukraine. In a statement, ASIC said the Federal Court found that LGSS’s contraventions were serious, as it used misleading representations to attract investors and enhance its reputation as a provider of investment funds with ESG characteristics. “As a result, investors lost the opportunity to invest in accordance with their investment values,” the court said. ASIC Deputy Chair Sarah Court said the Federal Court’s decision against Active Super is a “significant penalty that sends a strong message to companies making sustainable investment claims that those claims need to reflect the true position”. This is ASIC’s third successful greenwashing case. The regulator has had previous court successes against Vanguard Investments Australia in March 2024 and Mercer Superannuation in August last year.
Nuveen’s fifth annual institutional investor survey has identified growing investment in environmental opportunities across private equity, credit, infrastructure and real estate. As many as 71% of the UK-based cohort said they are planning to increase their allocations to private markets, with 52% increasing allocations to private credit. Private fixed income is also proving increasingly popular, with 45% of investors planning increased investment over the next two years. In addition, 69% of institutional investors surveyed either already invest or plan to invest in clean energy or carbon reduction strategies via private markets. “Environmental priorities are taking centre stage, shaping investment strategies and driving forward innovation in private markets,” said Sophie Ballard, Head of UK Pensions at Nuveen. “As sustainability becomes a key factor in decision-making, private assets provide a compelling avenue for investors to align financial goals with impactful environmental initiatives.” Nature-focused investments are also gaining traction, with 55% identifying nature loss as a critical economic risk and 66% acknowledging their role in mitigating it. However, it remains a developing area with only 37% placing a greater focus on these themes within portfolios.
