Nikko AM's green bonds fund returns 11.6% in first 12 months
EUROPE - Nikko Asset Management's Luxembourg-domiciled World Bank Green fund has returned 11.6% in its first 12 months - annualised as at 28 February 2011 - versus the benchmark return of 9.7%, supported by conservative currency positioning.
The green bonds fund - which scooped the 'Most Innovative Development in ESG' (environmental, social, governance) prize at IPE and TBLI's annual ESG Leaders Awards Ceremony in November 2010 - has raised almost £400m (€460m) from institutional investors in Europe and the Middle East, as well as Japanese investors, in the run-up to its first anniversary.
Stuart Kinnersley, chief investment officer at Nikko AM, said: "As the composition of global economy changes, investors should have exposure outside of the G3 currencies, especially with emerging market currencies growing in strength.
"High running yields, together with strong positive fundamentals, are a powerful combination for generating returns. The investment team's focus is on constructing a portfolio of currencies that will achieve capital growth and income over the mid to long term."
Equally split between emerging markets and developed markets exposure, the fund is the first of its kind to invest as much as 100% of its portfolio in green bonds issued by the World Bank, also known as the International Bank for Reconstruction and Development.
All proceeds of the generally AAA-rated green bonds support World Bank-funded projects designed to tackle the causes and consequences of climate change in the developing world.
These projects include alternative energy generation in rural areas of China, methane capture and biogas technologies, new energy-efficient technologies for public buildings in Montenegro, renewable energy systems in Argentina and reforestation and sustainable forest management in Mexico.
The recent oekom Corporate Responsibility Review 2011, as well as Eurosif's European SRI Study 2010, revealed that fixed income has attracted more interest and capital from institutional investors over the last two years.
However, Kinnersley said there was still a dearth of ESG-related bond issuers and products.