Weekly ESG News: Financial Services and Insurance Industry
News in the spotlight: KKR closes Global Impact Fund II on $2.8bn
KKR has successfully closed its second Global Impact fund at $2.8 billion, with commitments from various investors, including a $250 million contribution from KKR itself and $150 million from the Washington State Investment Board. This places KKR Global Impact II among the largest generalist impact funds, focusing on themes such as climate action, sustainable living, lifelong learning, and inclusive growth. The fund, with a six-year investment period from June 2022 to June 2028, marks KKR’s continued expansion into impact investments since launching its impact strategy in 2018. Led by Rob Antablin and Ken Mehlman, the 22-person impact team seeks resilient investments with intrinsic benefits and a focus on the commercial success of impactful companies. The fund’s diverse themes align with global imperatives, including the energy transition and workforce development.
Weekly Sustainable Finance Newsletter 45/2023
ESG News of the last week in detail
Products and Services
LGIM launches ESG Emerging Markets index fund
Legal and General Investment Management (LGIM) has introduced the L&G Future World ESG Emerging Markets Government Bond Local Currency Index Fund, featuring an enhanced sovereign risk ESG framework. The fund addresses income bias in sovereign ESG scores and aims to provide fair capital allocation to nations needing debt issuance for economic advancement. LGIM collaborated with JP Morgan and Verisk Maplecroft in its 18-month research and development phase, incorporating a proprietary fourth ESG pillar focused on geopolitical stability/risk. The funds will also include a sovereign ESG score momentum factor and utilize Verisk Maplecroft’s sovereign ESG data analytics. The new products represent a significant advancement in considering ESG risk across sovereign debt. The funds, meeting Article 8 criteria under the Sustainable Finance Disclosure Regulation, will be available to institutional investors in the UK immediately, with availability in the Netherlands, Germany, and Sweden by the end of 2023. Read more here.
BBVA increases investments in decarbonization funds
Spanish bank BBVA has increased its investment in climate-related funds to €108.4 million by investing €23.6 million in Decarbonization Partners Fund I. The fund, a joint venture between BlackRock and Temasek, focuses on late-stage venture capital and early-stage growth private companies contributing to decarbonization and the transition toward a carbon-neutral economy. The bank has previously invested in various climate funds, including Lowercarbon, Suma Capital, Just Climate, and the world’s largest clean hydrogen fund managed by HY24. Read more here.
World Bank issued USD 3bn 10-Year Sustainable Development Bond
On November 7, 2023, the World Bank successfully issued a 10-year Sustainable Development Bond, raising USD 3 billion to support initiatives aimed at eliminating global poverty and promoting environmental sustainability. The bond garnered enthusiastic support from a diverse group of global investors, with total orders exceeding USD 4.2 billion. Official institutions led the investor distribution with 51%, followed by bank treasuries and asset managers. The bond, listed on the Luxembourg Stock Exchange, offers a spread of 20.3 basis points versus the reference US Treasury, with a semi-annual yield of 4.788%. BMO Capital Markets, J.P. Morgan, RBC Capital Markets, and Wells Fargo Securities acted as lead managers for the transaction. The World Bank’s successful issuance was commended by market experts for its strategic timing and the institution’s ability to access global markets effectively. The funds raised are intended to contribute to sustainable development goals, addressing issues such as clean air, clean water, education, and healthcare in member countries. The bond’s settlement date is November 14, 2023, with a maturity date of November 14, 2033.
HANetf launches ESG-screened India internet & ecommerce ETF
HANetf, a European ETF white label provider, has launched the India Internet & Ecommerce ESG UCITS ETF to offer investors targeted exposure to India’s rapid digitization. India’s robust economic growth has translated into impressive stock market returns, with the BSE SENSEX gaining 93% over the past five years. The ETF tracks the India Internet & Ecommerce ESG Screened Index, ensuring that at least 50% of holdings’ revenue comes from internet and/or ecommerce. Developed in collaboration with EMQQ Global, the ETF taps into India’s digital revolution and the growing consumer spending power.
Tabula adds GBP-hedged share classes to Paris-aligned ultrashort bond ETF
Tabula Investment Management has introduced an unlisted share class for its Paris-aligned euro-denominated investment grade ultrashort bond ETF, the Tabula EUR Ultrashort IG Bond Paris-Aligned Climate UCITS ETF. The firm now offers two sterling-hedged share classes, with one listed on the London Stock Exchange and the other being Tabula’s first non-exchange-traded share class. Michael John Lytle, Tabula’s CEO, highlighted that this non-exchange traded share class extends ETF benefits to those who may lack the necessary tools for ETF trading. The TUCP ETF tracks the Solactive ISS Paris Aligned Select 0-1 Year Euro Corporate IG index, aligning with the goals of the Paris Agreement by aiming for a 50% reduction in greenhouse gas emissions. The move follows a trend seen with HSBC Asset Management and PIMCO in offering both listed and unlisted share classes within the same fund structure in compliance with European Securities and Markets Authority (ESMA) guidelines.
KKR closes Global Impact Fund II on $2.8bn
KKR has successfully closed its second Global Impact fund at $2.8 billion, with commitments from various investors, including a $250 million contribution from KKR itself and $150 million from the Washington State Investment Board. This places KKR Global Impact II among the largest generalist impact funds, focusing on themes such as climate action, sustainable living, lifelong learning, and inclusive growth. The fund, with a six-year investment period from June 2022 to June 2028, marks KKR’s continued expansion into impact investments since launching its impact strategy in 2018. Led by Rob Antablin and Ken Mehlman, the 22-person impact team seeks resilient investments with intrinsic benefits and a focus on the commercial success of impactful companies. The fund’s diverse themes align with global imperatives, including the energy transition and workforce development.
ESG Data and Analytics
Moody´s launches company decarbonization evaluation solution
Moody’s Analytics has introduced a pioneering framework called Net Zero Assessments (NZAs) to assist investors in evaluating and comparing companies’ decarbonization efforts. The initiative addresses challenges in assessing emissions reduction plans due to inconsistencies in disclosure requirements and differences in firms’ capacities. The NZAs utilize a scoring system from NZ-1 (highest) to NZ-5 (lowest) to evaluate entities against a Paris Agreement-consistent pathway towards achieving global net zero by 2050. The scores consider factors like ambition strength, plan implementation, and governance related to emissions reduction. The framework is applicable not only to financial corporations but also extends to non-financial entities, providing an independent and comparable assessment of their emissions reduction profiles. Brian Cahill, Global Head of ESG at Moody’s Investors Service, emphasizes the NZAs’ role in aiding market participants in understanding the positioning of entities transitioning to a low-carbon future.
Regulatory and Law
EFRAG and CDP announce cooperation for ESRS
EFRAG and CDP have announced a partnership to promote the adoption of European Sustainability Reporting Standards (ESRS). The collaboration aims to align CDP’s global environmental disclosure platform with EU reporting standards and facilitate capacity building for companies worldwide to comply with regulatory requirements. CDP will provide webinars and technical guidance materials, leveraging EFRAG’s expertise, to support over 23,000 disclosing companies in reporting on ESRS data points. The ESRS, covering climate change, pollution, water resources, biodiversity, and the circular economy, will apply to around 50,000 businesses starting January 2024, fostering a comprehensive and ambitious approach to environmental reporting.
Dutch regulator proposes amendments to SFDR
The Dutch Authority for the Financial Markets (AFM) has proposed revisions to the EU’s Sustainable Finance Disclosure Regulation (SFDR), recommending the removal of Article 8 and 9 classification categories. Instead, the AFM suggests a new labeling system with three categories: transition products, sustainable products, and sustainable impact products. The proposal aims to address the confusion in the asset management industry caused by vague SFDR definitions. This coincides with the EU’s ongoing review of the SFDR framework, initiated in March 2021 to enhance transparency in the sustainable investment market. The AFM’s move aligns with concerns raised by France’s markets watchdog AMF in February 2023 about the lack of minimum environmental impact requirements and unclear definitions contributing to greenwashing risks in Article 8 and 9 financial products.
Leadership Announcements
Edmond de Rothschild Appoints New Sustainability Head
Nathalie Wallace has been appointed as the Chief Sustainability Officer at the Geneva-based private bank Edmond de Rothschild. With 20 years of experience in the funds business, Wallace, previously associated with the French fund house Natixis Investment Managers, will be based in Paris. In her new role, she will oversee the bank’s sustainability initiatives in collaboration with the asset management business. Wallace will report directly to Cynthia Tobiano, the deputy head of the group, and Christophe Caspar, responsible for the institution’s fund business.
Natixis IM appointed Laura Kaliszewksi as Global Head of Client Sustainable Investing
Natixis Investment Managers has appointed Laura Kaliszewski as the Global Head of Client Sustainable Investing, a newly created role. In this position, Kaliszewski will lead a team supporting clients in their sustainable investment goals, utilizing Natixis IM’s resources and investment managers’ expertise. With over 15 years of experience in sustainable and impact investing, portfolio management, credit, and risk, Kaliszewski will play a crucial role in guiding clients through the evolving landscape of responsible investing. She reports to Fabrice Chemouny, Head of International Distribution, and David Giunta, CEO for the US. Natixis Investment Managers is a major global asset manager with over $1.2 trillion in assets under management, offering diverse solutions, including innovative environmental, social, and governance (ESG) strategies.
Nuveen appoints Nick Moss as Head of Nature-based Solutions
Nuveen has appointed Nick Moss as the first head of nature-based solutions in its natural capital unit, overseeing the firm’s nature-based investment strategy across farmland, forestry, and ecological restoration. Based in London, Moss will focus on reducing environmental impact and carbon footprints in commercial production processes while also safeguarding and restoring damaged habitats. As a seasoned professional in natural capital investments, Moss previously led the AGRI3 strategy, mobilizing $1 billion in public and private investment for forest conservation and sustainable agriculture.
Green Bond & ESG Bond Issuances
H&M issued first $500mn Green Bond
H&M Group has successfully issued its first green bond, raising €500 million (USD$530 million) to advance its environmental initiatives, focusing on climate and circularity goals. The 8-year bonds, part of H&M’s Euro Medium Term Note (EMTN) program, received overwhelming demand, being more than 3.5 times oversubscribed, totaling over €1.75 billion in orders. The issuance aligns with H&M Group’s Sustainable Finance Framework, outlining guidelines for both green and sustainability-linked financing. Adam Karlsson, CFO of H&M Group, expressed satisfaction with the strong investor interest, emphasizing the importance of extending the company’s debt maturity profile to support its commitment to a circular fashion industry with a net-zero climate impact.