Latest Launches

Neuberger Berman launches climate innovation fund

Managed by New York-based Evelyn Chow and Charlie Lim

Neuberger Berman has launched a fund to invest in technologies and solutions along the climate technology curve.

The Neuberger Berman Climate Innovation fund will maintain 30 to 60 global equity holdings.

It will focus on the key enablers and beneficiaries of climate innovation, by combining fundamental analysis with ESG investing.

The fund builds on thematic equity investing that spans themes ranging from next-generation mobility to the space economy.

Designated as Article 8 under the EU Sustainable Finance Disclosure Regulation, the fund will be benchmarked against the MSCI All-Country World Index.

It will be run by New York-based portfolio managers Evelyn Chow and Charlie Lim, who have a two-year track record in the strategy.

They will be backed by Neuberger Berman’s global equity research team of more than 49 investment professionals, as well as the firm’s data science and ESG teams.

Chow said: “Behavioral changes will only get us so far. We see a €90trn funding gap from now through 2050 to address climate change. According to the International Energy Agency, over 90% of the emissions reduction required to reach net zero will stem from the proliferation of low-carbon technologies.”

Lim added: “As such, we need to triple the level of annual investment taking place to combat climate change, which is driving the emergence of a new, historic capex cycle. Investing in climate innovation offers both a secular growth opportunity and a boon to society.”

Sarah Peasey, head of Europe ESG investing at Neuberger Berman, said: “Our clients are increasingly cognizant of the risks and opportunities that exist around climate change and the broader energy transition, while also recognizing that this can affect all asset classes, across public and private companies in their portfolios. 

“As technology and policy converge to support climate innovation, this theme offers compelling opportunities for investors by directing capital to companies developing the most effective technologies while also allowing them to participate in a more sustainable society.”

Green asset managers push on with energy transition

The Investor Leadership Network’s new initiative aims to speed up financing of the energy transition

An investor-led consortium has pledged a three-year deal to accelerate pension fund and institutional investments in sustainable infrastructure and the energy transition. 

The Investor Leadership Network (ILN) has the buy-in of the United States Treasury, The Rockefeller Foundation, and the Sustainable Markets Initiative to broaden and deepen private sector financing in emerging and developing economies. 

The initiative is focused on increasing access to data and developing mechanisms to spur investments in key sectors and countries, and is set to include co-investing with multilateral development banks. The ILN said it will set up a working group in time for COP28, the 28th United Nations Climate Change conference scheduled to be held in Dubai at the end of this year. 

The ILN, which turns five this year, was launched by the Group of 7 (G7) countries to power the transition to a sustainable global economy. Made up of asset owners and managers with over $10trn assets under management, it has three key areas of focus: private capital mobilisation for sustainable development; diversity, equity and inclusion; and climate change. 

Members include Canadian pension fund CDPQ, Natixis Investment Managers and global investment manager, Ninety One. Hendrik du Toit (pictured), founder and chief executive of Ninety One, said: “To achieve real-world decarbonisation, investors must finance new infrastructure and industries that will help the transition. 

“This includes investing at scale in green technology, but also providing capital for credible transition pathways for work on today’s high emitters – especially in emerging markets. Financing the transition in emerging markets is a critical part of the path to net zero.”

The initiative’s endorsement from the United States Treasury comes as welcome news to US asset managers facing a growing backlash against sustainable investing. Most recently, Congress has listened to evidence from both sides of the debate, which is split down political fault lines, after state attorney generals lobbied the law-making body to limit ESG investing. Asset managers are battling targeted action from state attorney generals that include being sued for breach of fiduciary duty for divesting in oil and gas assets, civil investigative demands and being placed on restricted lists.

BlackRock launches fund investing in materials sector transition

Materials sector accounts for more than 17% of global greenhouse gas emissions

BlackRock is targeting the transition to decarbonize the materials sector with a new fund investing in the area.

The BlackRock Brown to Green Materials fund aims to provide exposure to both materials that are essential to a transition, and opportunities created by decarbonizing materials supply.

This includes companies engaged in metals and mining, chemicals, steel and construction materials. 

The Brown to Green Materials theme also incorporates the materials supply chain and electrical equipment manufacturers that enable materials companies to decarbonize.

Such as industrial companies offering products such as electric mining trucks or lower carbon steel furnaces.

The newly launched fund will be classified as Article 8 under European regulation SFDR and will be a concentrated portfolio of 30 to 60 global companies, spanning across the market-cap spectrum. 

It will invest in companies it determines to be ‘emissions reducers’, materials companies with plans to reduce emissions intensity over a planned period, and ‘enablers’, those supplying materials required for lower-carbon technologies, along with other companies that enable materials companies to reduce their emissions.

The fund will also invest in ‘green leaders’, materials companies that are leading in their field in terms of emissions intensity.

Materials sector emissions

The materials sector accounts for a significant proportion of global emissions today, responsible for more than 17% of global greenhouse gas emissions, according to the World Resources Institute.

Materials businesses leading on reducing emissions intensity in their respective industries are likely to see persistent advantages as the market for low-carbon materials develops, according to BlackRock.

“We expect these companies to benefit from lower operational costs and lower decarbonizing capital requirements versus higher carbon peers,” it said in a statement.

BlackRock’s thematics and sectors team expects demand for transition materials to grow faster than historical rates driven by the move to a low-carbon global economy.

Many companies are focused on decarbonizing the supply of materials essential for a transition.

In the transition towards a low-carbon economy, most of the investment focus has been on renewables and electric vehicles. BlackRock’s view is that markets may have overlooked the ingredients essential to this infrastructure. 

The fund house believes carbon-intensive companies that have credible transition plans and/or that supply the materials needed for such a transition could offer some of the biggest investment opportunities.

Companies that are decarbonizing, in industries such as metals and mining, cement, and construction, are expected to benefit from a re-rating as their sustainability risks decrease and in-turn command a higher multiple. 

Earnings growth

Meanwhile, BlackRock’s thematics and sectors team believes companies producing transition metals are poised to benefit from stronger-than-expected earnings growth if adoption of lower-carbon technologies exceeds expectations. 

An example of a disruptive technology vastly exceeding consensus expectations due to the S-shaped nature of their adoption curves is demand for copper used in electric vehicles and renewables, for example, which is expected to be around 4.8 times higher in 2030 versus 2022.

Olivia Markham, managing director and portfolio manager at BlackRock, said: “A low-carbon transition sees the global economy moving from an energy system that is fossil fuel and carbon-intensive, to one where the critical inputs are materials and metals. 

“Following a period in which producers’ capital discipline has led to supply constraints, this is an exciting structural demand story that we expect to lead to significant value-creation opportunities for investors.”

The Brown to Green Materials fund will be managed by Evy Hambro, Olivia Markham and Hannah Johnson in BlackRock’s thematics and sectors team, who have been managing natural resources portfolios since their formation in 1991 and thematic portfolios since 2001.

The fund has an ongoing charges fee of 1% for its D share class.

ISS teams up with Qontigo to launch Biodiversity Index Suite 

The rapid loss of the Earth’s biodiversity is becoming a material risk to investors

Investors looking to reduce the biodiversity footprint of their portfolios are one step closer, with the release of the ISS STOXX Biodiversity Index Suite. Advisory firm Institutional Shareholder Services (ISS) and index creator Qontigo joined forces to build a suite of eight indices that screen companies deemed to inflict significant harm to biodiversity or that reduce its footprint.

Axel Lomholt, chief product officer for indices and benchmarks at STOXX said: “This launch comes as global investors are urged by some to account for and price nature into their sustainable investment strategies.”

Seven of the indices track companies with high biodiversity and climate-related Sustainable Development Goal (SDG) scores using three screens. The index methodology targets an aggregate reduction in carbon intensity of at least 30 percent across the included constituents.

Meanwhile, the ISS STOXX Biodiversity Leaders goes one step further. It includes only companies that earn at least 20% of their revenues from activities that are deemed to make a positive net contribution to the UN’s SDGs, like preservation of marine ecosystems and sustainable agriculture and forestry.

ISS STOXX Biodiversity Index Suite’s methodology. Source: Qontigo

The decline in the variety of the Earth’s living species is of growing concern to investors, but how to evaluate this growing risk is far from clear-cut. It is a “complex topic with data challenges”, according to data expert MSCI; as such, there is no general consensus on how investors can measure the impact and risk of biodiversity loss. 

Nevertheless, it is moving up the global agenda. The UN SDGs 14 and 15 are to conserve both life below water and life on land, respectively. To mark International Day for Biological Diversity this year, the UN called on the private sector to invest in impact funds and other instruments, as part of its 23-action oriented goals to build back biodiversity. 196 countries have now signed up to the groundbreaking Kunming-Montreal global biodiversity framework at COP15 in Montreal.

“Investor focus on managing biodiversity impact has the potential to become as significant and enduring as the current focus on climate change,” said Lorraine Kelly, global head of investment stewardship at ISS (pictured).

Touchstone launches thematic climate transition ETF

Active investors can tap into growth companies fighting the climate crisis

Touchstone Investments has launched a Climate Transition ETF allowing investors exposure to companies poised to prosper from the fight against the climate crisis. 

The actively-managed ETF will typically hold around 40-60 stocks that fall into three categories: solution providers, transition leaders and adaptation opportunities. 

These are companies whose growth will benefit from regulations, innovations, services, or products related to the global fight against or adaptation to climate change. It includes traditional corporates such as Mercedes-Benz as well as emerging companies like Danish renewable energy provider Ørsted. 

This is the first thematic ETF developed by Touchstone Investments, a member of Western & Southern Financial Group, which has already put out four other active ETFs. Thematic investing is a focused way to invest in today’s top trends and the “megatrends” of tomorrow, like the transition to a low-carbon economy. It has boomed in the last four years, with global assets in thematic funds almost tripling between 2019 and 2021 to reach $806bn, according to Morningstar.

Blake Moore (pictured), president and chief executive officer of Touchstone Investments, said: “With interest in both thematic and sustainable investing on the rise, the Climate Transition ETF seeks to provide advisers and the investors they serve with an opportunity to better position investment portfolios and meet long-term goals.”

For its first foray into climate-related ETFs, Touchstone picked Lombard Odier Investment Managers as HEAT’s sub-advisor. Paul Udall, portfolio manager for HEAT at Lombard Odier IM, said: “The transition to a net-zero and climate-resilient world is one of the greatest challenges – and investment opportunities – of our time,” said. 

“We are thrilled to have been selected by Touchstone as the sub-advisory partner of choice to expand their capability in this space. We have a shared prioritization of actively managed strategies that create opportunities for investors amid the climate transition.”

WisdomTree unveils Europe’s first California Carbon Allowances ETP

WCCA gives European investors exposure to the Golden State’s net-zero action plan

The fully collateralized WisdomTree California Carbon ETP (WCCA) is now listed on the London Stock Exchange, Borsa Italiana and Germany’s Börse Xetra, with a management expense ratio of 0.49%.

The New York-based exchange-traded fund provider’s newest exchange-traded product allows European investors to bet on the success of California’s carbon credit system. 

California’s Air Resources Board issues carbon allowances as part of its “cap-and-trade” emissions trading set-up, a markets-based system aimed at cutting global greenhouse gas emissions and slowing climate change. The market has been one of the fastest growing and is the second most liquid carbon allowance market globally; its futures traded around $1.7bn per month last year.

The WCCA tracks the price movement of ICE California Carbon Allowance Futures through the Solactive California Carbon Rolling Futures TR Index. It complements the $287m WisdomTree Carbon (CARB), a fully collateralized ETP providing exposure to EU carbon allowances.

WCCA product information. Source: WisdomTree

Reducing emissions to net zero is an increasingly important focus for policymakers around the world. California’s scheme is the first of its kind in North America, designed to help the state achieve its new target of slashing greenhouse gas emissions by 85% below 1990 levels by 2045.

Alexis Marinof (pictured), head of Europe at WisdomTree, said: “It is, therefore, imperative that investors have access to a wide spectrum of exposures. WCCA removes many of the barriers investors face when allocating to this asset class and builds on WisdomTree’s heritage of bringing hard-to-access exposures to investors through ETPs. 

“We are building a range of differentiated and complementary ETPs that allow investors to participate in the energy transition through thematic equities, commodities, or carbon allowances.”

Carbon credits show potential for environmental impact but people should think twice before using them as strategic investments, cautioned Morningstar. In a report published last year, it found that it is virtually impossible to peg the future financial costs to society of burning carbon today, in order to set caps. It also found little correlation between the nascent carbon credits market and energy prices moves.

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