Global asset manager Nuveen, which manages US$1.2 trillion in assets, has announced the first close of its second global climate inclusion private equity (PE) strategy with around US$200 million invested. Backed by the likes of Danish pension fund Velliv, the strategy – which is categorised as Article 9 under the EU’s Sustainable Finance Disclosure Regulation – aims to generate strong financial returns targeting solutions addressing climate change and inequality. “We believe that impact investing demonstrates how generating returns can go hand in hand with addressing the world’s challenges, whether they are social, environmental or a combination of both,” said Anders Stensbøl Christiansen, Chief Investment Officer at Velliv. “Nuveen PE Impact enables Velliv to achieve a global reach in our impact portfolio, delivering returns and measurable impact across several UN Sustainable Development Goals through both socially and environmentally focused investments.” Nuveen’s PE impact team intends to take an active role in driving environmental, social and financial results of the strategy by leveraging board seats and shareholder positions in investee companies. “We believe that climate change and inequality, two of the biggest challenges the world faces, can be addressed by commercial businesses,” said Rekha Unnithan, Head of Private Equity Impact at Nuveen. “The changing regulatory environment and shifts in consumer sentiment means overcoming those challenges also presents a compelling investment opportunity.”
Sustainable Investor
News in Brief
Ratings provider Moody’s has announced a partnership which will give clients access to the ESG ratings and sustainability data of index and analytics provider MSCI. According to a statement, Moody’s will migrate its existing ESG data and scores to MSCI’s sustainability content through “a range of solutions” serving Moody’s customers in the banking, insurance and corporate sectors. As part of the new arrangement, MSCI will gain access to Moody’s Orbis database, which contains information on more than 500 million entities. The two firms will also explore solutions that leverage Moody’s private company data and credit scoring models to provide greater insight into the private credit market. “This is a real win-win, as Moody’s customers gain access to MSCI’s renowned ESG content and MSCI customers will gain access to Moody’s world-class risk assessment expertise, data and insights,” said Rob Fauber, President & CEO of Moody’s. According to separate reports, the deal was preceded by redundancies at Moody’s ESG Solutions business, which was formed largely from Vigeo Eiris, acquired in 2019. ESG ratings and data providers are subject to increasing levels of regulation, including new rules in Europe which require increased comparability and transparency and seek to eliminate conflicts of interest. Moody’s will continue to provide information on the material impacts of ESG factors on its credit ratings through proprietary scores, and will offer sustainable finance offerings including second party opinions and net zero assessments.
Luiz Amaral has stepped down as CEO of the Science Based Targets initiative (SBTi), citing “personal reasons” as the cause. The initiative’s Chief Legal Officer Susan Jenny Ehr will act as interim CEO, with the recruitment process for a permanent replacement already underway. In recent months, SBTi has faced both internal and external scrutiny over its decision earlier this year to extend the use of carbon credits to tackle companies’ Scope 3 emissions in its Corporate Net-Zero Standard – prompting calls from SBTi staff members for Amaral to be sacked. Greenpeace International said the proposal undermined SBTi’s credibility, while non-profit Carbon Market Watch said the initiative appeared to have “buckled to pressure” from corporate interests. Last year, SBTi was also criticised for having an unattainable net zero definition for SMEs. This week, SBTi has published its 2023 Monitoring Report, which saw Asia-based companies drive a 102% increase in the number of firms with science-based targets. According to the report, Japan has become the world leader for companies with science-based targets, while India saw a 520% in-year growth of companies setting targets.
Today we announce that Luiz Fernando do Amaral is stepping down as CEO of the SBTi, effective July 31st. Luiz is stepping down for personal reasons and Susan Jenny Ehr, currently Chief Legal Officer, will step in as interim CEO.
Read more here: https://t.co/yEzE2j3q5B
— Science Based Targets initiative (@sciencetargets) July 2, 2024
Private equity and infrastructure assets collectively raised 66% of all ESG funds (US$55 billion) – US$18.4 billion and US$17.9 billion respectively – between January and April, according to alternative assets data provider Preqin’s latest ‘ESG in Alternatives’ report. Last year, 59% of private infrastructure deals were in renewable energy, rising from 52% in 2022, the report added. While ESG is still perceived by some alternatives fund managers as a fundraising tool to align with investors’ ESG policies, many also see it as a means of mitigating risks to returns and reputation, Preqin said. Half of surveyed infrastructure investors reported that they now have an ESG policy in place. Preqin also found that private ESG funds’ performance is not significantly different to non-ESG private funds overall, noting that the average internal rate of return (IRR) of ESG funds was 13.5% compared to 15% IRR for non-ESG funds. “The strong growth in ESG fundraising across private markets suggests more managers want new funds to be aligned with ESG fund requirements,” said Alex Murray, Head of Real Assets and Research Insights at Preqin. “The reasons vary from being more able to raise capital to aiding risk management and deal selection strategies. Regardless, the still relatively nascent sector within alternatives will continue to grow, owing to Europe’s more developed regulatory environment.”
The UN-backed Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool has been updated to support companies and financial institutions choosing to comply with the Taskforce on Nature-related Financial Disclosures (TNFD) framework. “As the market’s interest in nature has developed and matured over the past years, so too has ENCORE, rolling out an increasingly comprehensive offering to organisations seeking to understand and ultimately disclose on their nature-related issues,” said Emily McKenzie, the TNFD’s Technical Director. The update covers seven key improvements, including the expansion of its list of 92 ‘production processes’ to 271 ‘economic activities’ and more actionable insights on how these activities can impact nature. These activities cover livestock farming, chemicals manufacturing, nuclear power production and more. In addition, all data on the nature-related impacts and dependencies of listed economic activities has been updated based on the latest scientific research. ENCORE also now offers an improved methodology of its materiality ratings to better outline how significant potential nature dependencies are and how much pressure economic activities have on nature. This will enable comparisons between economic activities across all covered sectors. “As growing numbers of companies begin to disclose on nature dependencies, impacts, risks and opportunities, screening tools like ENCORE help them identify the issues that are most likely to be material and should be prioritised in assessments,” said Eric Usher, Head of the UN Environment Programme Finance Initiative (UNEP FI). ENCORE was launched in 2018 and is a collaboration between Global Canopy, the UNEP FI and UN Environment Programme World Conservation Monitoring Centre.
Bloomberg has added ESG indicators mandated under the EU’s Sustainable Finance Disclosure Regulation (SFDR) to its portfolio and risk analytics solutions tool, PORT. The tool gives access to the greenhouse gas emissions data of over 130,000 global public and private companies, with Bloomberg’s proprietary ESG scores used to assess their performance and disclosures. PORT is available to all Bloomberg Terminal users, while PORT Enterprise is a premium service. Both now have access to the indicators. PORT Enterprise has been expanded to include the newly released standardised SFDR report based on the European Securities and Markets Authority template, in addition to customisable sustainability reports, helping users meet EU reporting requirements. “Investors need increasingly sophisticated solutions to identify sustainability-related risks and opportunities, and meet their objectives and obligations,” said Soojin Lee, Head of ESG Integration and Analytics at Bloomberg. “Bloomberg’s expanded PORT offering enables clients to manage and conduct detailed sustainability analysis on their portfolios, all in one place and through the click of a button.” Users can also access standardised reporting templates and design their own reports with Bloomberg’s PORT Enterprise functionality.
UK-based pensions trusteeship and governance services provider the Independent Governance Group (IGG) has made 17 promotions and 11 hires to boost activity for its second year in operation. Dan Gilmour and Michael Do have been promoted to Trustee Directors, having both joined the business in 2022. Do has more than two decades’ experience in pensions, including 14 at two of the UK’s largest occupational pension schemes. Meanwhile, Gilmour has extensive experience as a specialist employer covenant adviser. Other promotions within the IGG included those of accredited trustees Collette Taylor, Lewis Drew, Maria Keen and Stephanie Jenner to Associate Director, Andrew McCarthy, Chris Tabersham and David Preston to Trustee Managers; of Richard Haslam to Senior Associate; and of Adam Whitehead, Ceri Tracey, Keira Neale and Nick Bird to Associates. All the promotions are effective as of 1 July. Across May and June, the IGG also welcomed 11 new joiners in client-facing and central services roles. “Delivering exceptional results for our clients is only made possible by the talented team we have. This latest round of promotions shows the dedication of the team, demonstrating each individual’s commitment to professionalism and development,” said Andrew Bradshaw, CEO of IGG. “A real strength of [ours] is our team-based approach, which provides exposure to every aspect of trusteeship and governance. These promotions continue to reflect two of our core values – prioritising people and embracing diversity.” The IGG has an established presence in both Edinburgh and Manchester. Its services include IGGnite – a streamlined services model offering cost-effective professional trusteeship and scheme management services – and IGGiQ, a tool aiming to improve ESG data integration and management.
The investment potential in solar and offshore wind in Asia will represent an expected US$1.1 trillion by 2050, generating 873 gigawatts (GW) of clean energy, according to research published by the Institute for Energy Economics and Financial Analysis (IEEFA). The report focused on seven markets – Japan, South Korea, Malaysia, Taiwan, Vietnam, Indonesia and the Philippines – estimating that, by 2050, projected plans to install 634 GW of capacity will require US$394 billion in investment – including US$346 billion for local supply chains. Meanwhile, offshore wind in the region represents a US$621 billion investment opportunity, with goals to deliver 239 GW of capacity. “The report highlights the here-and-now opportunity to capitalise on the renewable energy supply chain,” said Grant Hauber, IEEFA’s Strategic Energy Finance Advisor, Asia. “Solar energy offers immediate investment benefits to the Asia-Pacific, while the advantages of participating in the offshore wind supply chain will develop over the next several years.” There is also between US$72-97 billion of investment opportunity in offshore wind installation and service vessels in the maritime sector, the report noted. “A key message for policymakers and industrialists is that you do not need to make solar [photovoltaic] modules or wind turbines to realise huge domestic manufacturing and investment benefits,” said Hauber.
Greater Manchester Pension Fund (GMPF), one of the UK’s largest local government pension schemes with assets under management (AUM) of £30 billion (US$ 37.9 billion), has adopted pass-through voting – calling this a “significant step” towards enhancing its responsible investment strategy. Pass-through voting allows pension schemes to enforce their voting preferences on shareholder resolutions at AGMs within their pooled-fund investments. By using this method, they can uniformly apply their voting policy across both segregated and pooled funds, allowing them to directly influence decisions on critical issues such as CEO remuneration and climate change. This was recently exemplified when GMPF, a member of Climate Action 100+, supported the resolution filed by NGO Follow This at Shell’s AGM, urging the oil major to align its medium-term emissions reduction targets with the Paris Agreement. Historically, GMPF’s segregated mandates were voted according to its values through a policy managed by Pensions & Investment Research Consultants (PIRC), while Legal & General Investment Management (LGIM) controlled votes for its pooled funds. The introduction of pass-through voting now bridges this gap, providing the fund with greater influence and consistency. GMPF partnered with fintech Tumelo to implement the capability. “Pension funds are increasingly aware of their potential to impact the companies they invest in,” said Georgia Stewart, CEO of Tumelo. “Customising stewardship is crucial in amplifying this influence, ensuring investments reflect their goals.” GMPF’s adoption of pass-through voting also aligns with a growing trend among pension schemes, as evidenced by similar decisions from the £2 billion pension pool for Camden, and the £3 billion Superannuation Arrangements of the University of London (SAUL). “These moves signify a collective effort to harmonise voting policies across equities, ensuring that investments reflect the schemes’ responsible investment values,” GMPF said.
The asset management arm of Spanish insurance group MAPFRE has added three funds to its line of sustainable products, enabling clients to further pursue social goals beyond financial returns. MAPFRE AM European Equities, MAPFRE AM Iberian Equities, and MAPFRE AM Good Governance are all Article 8-compliant under the Sustainable Finance Disclosure Regulation (SFDR). All three of them were previously available, but have now had ESG criteria incorporated into investment decisions. “This represents another step forward in our commitment to increasing our line of sustainable products,” said Álvaro Anguita, Managing Director of MAPFRE AM. “Traditionally, these funds have always done well, but now we’ve given them an important qualitative enhancement by focusing on investments that help improve society and the environment.” The asset manager’s work in this area is ongoing, Anguita explained, meaning it will likely add more funds in the future. MAPFRE AM is currently looking to obtain an Article 8 classification for its Global Bond Fund, created by merging two other funds in early 2021. At the end of last year, it also launched MAPFRE Renewable Energies II – Europe’s first fund dedicated entirely to biomethane, classified as Article 9 under the SFDR. “MAPFRE continues to demonstrate its commitment to sustainability by integrating ESG criteria into its business strategy and investment decisions,” the firm said in a statement. “In addition to developing sustainable investment products, the company is also evaluating [its] carbon footprint, providing ESG training to its investment teams, and producing a socially responsible investment guide that can be implemented by its personnel.” The company’s 2024-2026 sustainability plan set some ambitious goals, such as ensuring that 95% of its global investment portfolio is classified using ESG criteria by 2026, reducing the carbon emissions generated by its investment portfolio by 20%, and ensuring that at least 50% of MAPFRE AM’s new and updated products comply with sustainability criteria. The group has also excluded investment in coal, natural gas, oil companies unless they are committed to an energy transition plan.
