PIMCO, Lombard Odier, Northern Trust unveil ESG, climate change funds

A flurry of ESG fund announcements from major asset managers yesterday underscores the mainstreaming of responsible investment, including through its integration in asset classes beyond equities.   

US fixed-income investment manager PIMCO announced that it had launched an environmental, social, and governance (ESG) investment platform that aimed to offer “a range of fixed income solutions to investors seeking attractive returns while making a positive social impact”.

In a statement, the asset manager said it had launched a global bond ESG fund for the Europe, Middle East, and Africa (EMEA) region as part of the move, and modified two of its socially responsible funds in the US to incorporate a wider range of ESG considerations into the investment process.

The PIMCO GIS Global Bond ESG Fund invests in sovereign and investment grade corporate bonds, the company said. It aims to maximise total return while favouring bond issuers that are deemed “best-in-class” with respect to ESG practices, and those working to improve them.

Alex Struc, portfolio manager and co-head of the ESG initiative at PIMCO, said: “Historically, this type of strategy has been pursued by equity investors but we firmly believe that engagement as a debtholder is equally important. Across the vast fixed income universe, small change can have an enormous positive impact.”

In a statement, Eric Moen, managing director of ESG research at MSCI, told IPE: “We believe we are seeing a tipping point for ESG integration with many of the world’s leading equities and fixed income investors realising the value of incorporating ESG signals into their investment processes to identify risks and opportunities not normally flagged by conventional financial analysis.”

Also in fixed income, Lombard Odier Investment Managers (LOIM) today announced a partnership with Affirmative Investment Management (AIM), a fixed income manager dedicated to impact strategies.

The aim of the partnership is to add to Lombard Odier’s impact investing capabilities and to launch a new fund “designed to help combat climate change in a verifiable way”, the Swiss firm said. No further information has been provided about the fund.  

In a statement, Carolina Minio-Paluello, global head of sales and solutions at LOIM, said that “a major shift in capital” was required to bridge the funding gap standing in the way of meeting the COP21 target of limiting the global temperature rise to two degrees.

“Our investors are keen to understand how they can be involved,” she added. “We are extremely pleased to be partnering with the specialists at AIM and together with our own robust impact investing expertise, we are seeking  to develop a compelling and competitive proposition for investors.”

Stephen Fitzgerald, co-founder and chairman of AIM, said: “Responsible capitalism has often been perceived as coming at a cost; either lower returns or increased risk.

“Our approach seeks to combine mainstream portfolio management and impact, without compromising either.”

AIM describes itself as “the first dedicated green bond manager focusing solely on bond and cash investments that generate positive environmental and social externalities”.

Its CEO, Stuart Kinnersley, created the first dedicated green bond fund at Nikko AM in 2010, and its head of sustainability Judith Moore originated the criteria for the creation of green bonds when she was head of the corporate responsibility team at the World Bank.

Finally, Northern Trust Asset Management has teamed up with GRESB for the launch of a new sustainable real estate index incorporating ESG factors, with a Dutch-pooled fund tracking the index.

The fund is designed to provide passive investors with exposure to the performance of listed real estate companies in developed markets whilst integrating responsible investment criteria.

The index is being described as an “industry first”. It uses data from GRESB, an organisation based in Netherlands that assesses the ESG performance of real estate and infrastructure assets.

Sander Paul van Tongeren, managing director of GRESB, said: “This new fund will, uniquely, allow investors to passively gain exposure to companies that are highly transparent about their ESG performance and reducing environmental and social impact while also incorporating broad geographic and sector diversification.”

He also said the use of GRESB’s ESG data “further institutionalizes the important role of environmental, social and governance information in the financial market”.