“With ESG investing becoming increasingly relevant, it will be key for active investors who look to generate excess returns to detect those opportunities where the ESG premium is not yet priced in fully,” wrote Kasper Elmgreen, head of equities, and Piergaetano Iaccarino, head of equity solutions.
“A way to do it, in our view, is moving from a static best-in-class approach to a dynamic and forward-looking one, seeking tomorrow’s ESG leaders.”
Targeting what the Amundi specialists referred to as ‘ESG improvers’ could mitigate the risk of an ESG bubble that was possibly emerging from investors’ increasing focus on ESG, they wrote.
According to Elmgreen and Iaccarino, identifying and extracting value from companies on an upward ESG trajectory was possible as ESG implementation tended to be a slow-moving dynamic.
“Investing in ESG-improvers will have a positive fallout on our world in our view,” they added. “In addition, these companies could benefit from the tidal wave of assets waiting to be invested in strong ESG stewards.”
€33bn in orders for debut Germany green bond
Germany issued its highly anticipated inaugural green bond yesterday, a €6.5bn 10-year deal that drew more than €33bn in orders, according to the country’s federal finance agency.
The 0% Green Bund was priced at 104.717%, slightly higher than the secondary market price of the standard bond that is paired with the green bond under the sovereign’s ‘twin bond’ concept. In connection with that the sovereign will increase the size of the conventional twin bond, which was issued in June, on its own books.
Welcoming the sovereign’s green bond as a “milestone” for the green bond market, Bram Bos, lead portfolio manager for the asset class at NN Investment Partners, said the asset manager considered the twin bond approach ”a much better option than the concept currently being explored by the Danish government, which is looking to issue separate green labels or stickers which could be attached to any conventional bond”.
He said NN IP missed a ’do no harm’ assessment in the government’s green bond framework, but that there were positives, such as the ambition to only allow green hydrogen production in the eligible use of proceeds.
Germany is planning to issue a full green bond yield curve. Its next issue is lined up for the fourth quarter, with the finance agency saying that Green Bund would probably come with a five-year maturity.
Germany is the third triple-A rated country to start issuing green government bonds, after the Netherlands in 2019 and Sweden earlier this week.
Money in passive sustainable funds more than doubles in three years
The number of sustainable index mutual funds and exchange-traded funds globally more than doubled over the past three years, as did the money invested in them, according to Morningstar.
The firm counted 534 such funds as of 30 June this year and collective assets under management of $250bn (€208bn). New fund launches reached a record 98 over 2019, with 2020 looking set to surpass this based on 84 new entrants in the first half of the year.
However, the fixed income segment remains undercultivated, Morningstar said, with European investors having 53 passive bond funds to choose from.
As for fees, passive sustainable funds tended to charge higher fees than their plain-vanilla peers but in some European markets investors could choose from an expanding range of options with little or no fee premium.
SASB opens for comment on revision proposals
The Sustainability Accounting Standards Board (SASB) is consulting on proposed revisions to two of its foundational standard-setting documents, issued in early 2017.
It said the revisions were designed to further clarify and explain SASB’s approach to standard setting, including its principles, processes, and practices, and were not changing its fundamental approach to, or processes for, setting SASB standards.
“In September 2019, the Standards Board began projects to revise and update the 2017 Conceptual Framework and Rules of Procedure,” SASB said.
“The Board’s decision to undertake these projects was based on the outdated organisational mission statement contained in the existing documents, as well as the Board’s view that the existing documents do not reflect SASB’s global perspective and that they contain outdated assumptions, definitions, and data.”
A consultation by the Global Reporting Initiative (GRI) on changes to its “Universal Standards” closes on 9 September. According to the GRI, the “refresh” of the standards includes new disclosures on responsible business conduct, due diligence, human rights and governance; and greater clarity and new guidance on the key concepts of reporting such as ‘impact’ and ‘stakeholder’.
In July SASB and the GRI announced a collaboration to show how their respective standards could together form the basis for a globally accepted system or sustainability reporting.
Cbus joins net-zero asset owner club
The Australian building and construction industry pension fund has joined the UN Net-Zero Asset Owners Alliance, the first Australian asset owner to do so. The Alliance now counts 29 members.
“Cbus recognises that to decarbonise the global economy in line with the Paris Agreement requires collective action,” said Cbus Super CIO Kristian Fok.
The superannuation fund this week also announced it would be targeting an ambitious 45% reduction in absolute portfolio emissions by 2030, and that it had “locked in” a commitment to achieve net zero emissions by 2050.
Under a new climate change “roadmap”, Cbus would be developing pathways to achieve its portfolio targets for each asset class, it said.