A four-part framework has been released by the UN Principles for Responsible Investment (PRI) to help asset owners and managers intentionally generate a positive impact through their investment activities. The guide – co-published by the Generation Foundation and the UN Environment Programme Finance Initiative – follows on from and helps implement the findings of ’A Legal Framework for Impact’, a joint project which outlined the basis for achieving sustainable impact in 11 jurisdictions. It characterises the four steps to sustainable impact as determining intention, setting real-world sustainability goals, taking action through a combination of tools, and measuring progress. The framework distinguishes between an ‘instrumental’ approach, where the sustainability impact is integral to realising the investor’s financial goals, and ‘ultimate ends’, where the impact sought is pursued alongside the investor’s financial goals. “The Legal Framework for Impact project showed that the debate is shifting from whether investors should consider sustainability outcomes at all, to asking why – and how – investors can play an effective role in addressing proactively sustainability challenges, as relevant to their duties and obligations,” said Margarita Pirovska, Director of Global Policy at PRI. Separately, investment consultants bfinance said more than more than half of global asset owners were engaged or interested in impact investing, based on a survey of 300 senior investors at firms representing US$7 trillion AUM. A quarter of investors said they intended to increase exposure to impact strategies. A study of 150 UK-based institutional investors by Legal & General found that impact and sustainability mandates would account for nearly half of private markets portfolios in two years’ time.
Sustainable Investor
News in Brief
The Investor Coalition for Equal Votes’ (ICEV) new report has showcased measures imposed by some of the world’s largest investors on companies that have unequal voting rights though the use of dual class share structures (DCSS). The report outlines the implications for companies with unequal voting rights for their relationships with institutional investors, finding that investors globally support a one share, one vote model, with this view becoming increasingly strengthened over time. In the report, investor respondents also highlighted that DCSS undermine confidence in companies’ corporate governance. Examples of voting sanctions from 31 of the world’s largest asset owners and managers highlighted by the report included votes against directors and board members at companies with unequal voting rights, and capital resolutions at companies with DCSS. ICEV has also engaged with EU, UK, and US policymakers to try to discourage the rolling back of equal voting rights, arguing that “robust investor protections” are “vital” for healthy capital markets. “As policymakers around the world roll back investor protections, it’s vital that independent shareholders think about how to most effectively wield available stewardship tools to ensure their voice as the owners of capital is heard,” said Caroline Escott, ICEV’s Chair and Senior Investment Manager at Railpen. “We encourage investors to be creative around how they use their vote and to continue to use this tool as a public expression of their concerns around unequal voting rights – as they would on any other issue that matters to financial outcomes for their beneficiaries and clients.” Co-founded by UK pension scheme Railpen and the US Council of Institutional Investors in 2022, the ICEV’s global investor members manage more than US$4 trillion in AUM.
European asset manager Amundi has launched a broad range of Global ESG Factor exchange-traded funds (ETFs). Categorised as Article 8 under the EU Sustainable Finance Disclosure Regulation (SFDR), the funds will allow investors to integrate responsible investment criteria while also providing them with exposure to four factor strategies: value, momentum, minimum volatility and low size. “The launch of this broad and competitive range of ESG Factor ETFs demonstrates our commitment to innovation to meet the needs of our clients,” said Benoit Sorel, Head of the ETF, Index and Smart Beta business line at Amundi. “We are delighted to offer them a flexible tool that allows them to adjust their portfolio allocations and navigate market cycles while incorporating responsible criteria.” Earlier this year, the firm launched the USD Corporate Bond PAB Net Zero Ambition Fund, which tracks the Bloomberg MSCI USD Corporate Paris-aligned Green Tilted Index and aims to implement strict ESG exclusions for companies involved in controversial activities, while also providing investors with exposure to US dollar-denominated investment grade corporate bonds. In addition, Amundi has recently introduced a private equity fund focused on investing in small- and mid-sized firms providing climate solutions that also minimise any potential social harms.
Europe’s green finance framework must do a better job of identifying investments that contribute to a just transition to a sustainable economy, according to a new regulatory roadmap. The recommendations, made by the European Sustainable Investment Forum (Eurosif), also included a call for a strengthening of the tools that enable investment in a just transition, as well enhanced investor stewardship and engagement “to incentivise and support the sustainable transition of the companies they invest in”. The Eurosif report said there was a need to scale-up investments accelerating sustainable growth and a just transition to a resilient and low-carbon economy, listing a series of policy actions underpinning each of its recommendations. These included clearer definitions for sustainable, transition, and impact investments, as part of the Sustainable Finance Disclosure Regulation review, as well as the development of an EU social investment standard. The association said a just transition to a sustainable and resilient economy would enable the EU to address intensifying challenges – including protectionism, conflict, and climate crises – while maintaining financial stability, reinvigorating economic growth and competitiveness, and guaranteeing strategic autonomy. But it warned that the private sector capital needed to achieve these goals could only be secured via a sustainable finance regulatory framework that is “coherent, sufficiently ambitious, usable, well-implemented and complete”. “While public support and funding is essential, private finance remains key in bridging the current investment gap,” said Eurosif Executive Director Aleksandra Palinska. “We urge EU policymakers to heed the recommendations set out in this roadmap and to consider the enormous economic and societal risks of inaction when compared to the significant benefits and advantages of delivering sustainable growth.”
Denham Capital has named Justin DeAngelis to the newly created position of Global Head of Sustainable Infrastructure. DeAngelis joined the Global energy transition investment firm in 2006 and from 2020 spent four years as co-head of Denham Sustainable Infrastructure (DSI). In the new role, DeAngelis will take on full responsibility for DSI’s strategic leadership and execution. Under his stewardship, DSI established a credit platform which has since expanded into a US$3.4 billion AUM global equity and credit sustainable infrastructure business, as well as hiring and integrating an entirely new credit team. DeAngelis was also responsible for driving a revamped investment strategy, including expansion into sustainable infrastructure sectors beyond power generation. Specialising in private equity, infrastructure and credit, Denham has raised more than US$12 billion of capital since it was founded in 2004. “Justin’s appointment recognises his integral role in driving the growth and success of DSI in recent years,” said Stuart Porter, Founder and CEO of Denham. “As we make this transition to the next generation, I look forward to continuing to work closely with Justin as he leads our sustainable infrastructure strategy, positioning Denham to capitalise on global value-add opportunities.”
The European Council has adopted a regulation prohibiting products traded across the bloc made with forced labour. The regulation, which was first proposed in 2022, creates a framework on which to base legal action targeting any products exposed to forced labour within the EU. “Businesses have never been more in the spotlight not only for their profits but also their behaviours,” said Lucy Blake, Co-chair of Human Rights and Global Strategy at law firm Jenner and Block. “Those that exaggerate their credentials, even unintentionally, can face regulatory fines, litigation and suffer extensive reputational damage.” The European Commission will now create a database of forced labour risk areas or products for authorities to draw on when assessing possible violations of the regulation. Once it has been signed by the presidents of the parliament and council, the regulation will enter into force and apply after three years. CCLA Investment Management has also published its latest Modern Slavery Benchmark, noting that 30 of the 110 assessed companies found evidence of modern slavery in their supply chains or indicators that some form of forced labour was taking place. This is an increase from 25 companies last year. Companies have continued to underperform in rectifying the damage done to individuals when this abuse it revealed, CCLA said. “Businesses have an obligation to find, fix and prevent [forced labour] and we should not judge them for exposing modern slavery, but on what they do to address it when they uncover it,” said Peter Hugh Smith, CCLA’s CEO. “As an investor, we are determined to do all we can to stamp out modern slavery, including using our influence to bring investors together as well as engage directly with the companies in which we invest – we call on investors, companies and policymakers to do more to address this scourge.”
Desmos Capital Partners, a sustainability-focused investment advisory firm founded by former UK energy minister Chris Skidmore, has expanded through the establishment of four new regional centres. Skidmore, who signed the UK’s legally binding net zero commitment in 2019, said the new offices – located in Paris, Amsterdam, Johannesburg and Toronto – would allow Desmos to meet growing global interest in supporting companies focused on the scaling up of sustainable and low emissions technologies. Since launch in July, Desmos has secured more than ten mandates to raise over £250 million (US$317 million) in capital for companies across the world. This includes a €30 million (US$31.6 million) raise for Meatable, a lab-grown meat technology recognised by Time Magazine as one of the Top 200 Innovations of 2024. The new capital is intended to establish the Netherlands-based firm as a global leader in cultivated meat, to help deliver emissions reductions and enable a transformation of the meat industry away from non-sustainable practices. Desmos’ expansion aims to establish the firm as a global sustainable investment bank, specialising in supporting green and sustainable technologies across emerging markets, with plans to expand into the US in 2025. “Since announcing the creation of Desmos, I’ve been taken aback by the level of support but also by the tremendous demand from companies focused on the technologies and solutions of tomorrow to provide a sustainable future,” said Skidmore, Chair and Founding Partner, speaking at COP29. “Desmos is here to play its role in facilitating the wider energy transition and the transformation towards a sustainable economy.”
France-based BNP Paribas Asset Management (BNPP AM) has unveiled the Future Forest Fund, a new Article 9 EU Sustainable Finance Disclosure Regulation product. The fund will invest in sustainable forestry assets that will generate strong financial returns, combining sustainable investment practices to combat climate change, advance asset resilience, and bolster biodiversity. The vehicle has a target size of US$500 million – with a US$750 million hard cap – and had a first closing of US$130 million this month. According to BNPP AM, sustainable forestry investments offer investors an opportunity to align environmental and social benefits with financial objectives, as well as play a “significant role in investment portfolios”. The UN Food and Agriculture Organization has projected wood demand to increase by between 37% and 60% by 2050 from 2020 levels. The fund is the first launched by BNPP AM in partnership with Danish global natural capital specialist IWC, in which the asset manager has a majority stake. IWC currently oversees over US$6 billion of natural capital investment programmes globally. “We are very pleased to partner with IWC and leverage their deep expertise in natural capital, ensuring that we make a meaningful impact in the world of sustainable forestry,” said David Vaillant, Global Head of Finance, Strategy and Participations at BNPP AM and Chairman of IWC. “This new fund will enable us to answer our clients’ growing interest in this new asset class as we widen our breadth of natural capital solutions.”
Versorgungsanstadlt des Bundes und der Länder (VBL) – a German occupational pension fund – has awarded Nordea Asset Management (NAM) a €1.25 billion (US$1.3 billion) mandate focused on alignment with Paris Agreement goals. VBL has committed to its equity and corporate bond portfolio being below 92 tonnes of CO2 equivalent per million euros of turnover and expects NAM to deliver on this objective. The asset owner pointed to the Nordea European Stars Equity Strategy as an example of the investor’s track record selecting companies that are industry leaders in CO2 reduction and supporting innovative products contributing to a low-emission economy. “Over the past three years, we have already reduced the CO2 intensity of our equities and corporate bonds by more than 25%,” said Dr Michael Leinwand, VBL’s Chief Investment Officer. “It is now important for us to continue on this CO2 reduction path.” VBL’s portfolio will be managed relative to the MSCI Europe Climate Paris-aligned Benchmark. “The fact that we can support VCL in the implementation of its sustainability strategy confirms to us that we are on the right track with our approach of reconciling climate objectives and investment performance,” said Christophe Girondel, Global Head of Distribution at NAM.
Research by Morningstar Sustainalytics has found “significant disparities” in the climate transition performance of companies and funds, with none currently aligned to a net zero pathway consistent with limiting climate change to 1.5°C. Only 17% of the 10,000 firms analysed for transition readiness and less than 3% of 60,000 active and passive investment vehicles are on a 2°C trajectory, the data and analytics provider added. However, the study, which utilised Morningstar Sustainalytics’ Low Carbon Transition Ratings, found that funds are rated as taking more effective climate action than corporates, with 30% achieving strong emissions management scores compared to 14% of companies. Morningstar Sustainalytics said funds’ better performance was due partly to their overall bias toward developed countries and large-cap firms, also noting that green bond funds had stronger emissions management scores than other strategies. Europe was reported as having the highest proportion of companies and funds managing their transition risk and emissions effectively. “Some businesses and investments will benefit from the transition, while others will be disadvantaged. Given the varying levels of climate action taken by companies and funds, investors must be discerning in their choices,” said Hortense Bioy, Head of Sustainable Investing Research at Morningstar Sustainalytics. Separately, ratings provider Sustainable Fitch has launched an expanded Transition Assessment analytical product through the development of new sector-specific methodologies covering hard-to-abate sectors such as mining, steel and cement. The assessment is an opinion on the ambition, credibility and implementation of entities’ climate transition plans in carbon-intensive sectors, aiming to help investors differentiate between companies on their progress towards net zero.
