PKH, the NOK22bn (€2.4bn) Norwegian pension fund for health authorities, has seeded a global high yield environmental, social, and governance (ESG) themed bond fund run by BlueBay Asset Management.
The fund was kicked off by a mandate from PKH for an ESG strategy for their global bond portfolio, according to My-Linh Ngo, ESG specialist at BlueBay.
The main requirement from PKH was for the fund to comply with the exclusion criteria applied by Norges Bank Investment Management (NBIM) for Norway’s Government Pension Fund Global, Ngo told IPE. It covers companies involved with controversial weapons, tobacco, and coal-based energy.
“From BlueBay we’ve contributed our own controversial weapons criteria and UN Global Compact screen,” added Ngo. “We wanted to contribute strategies that complement the Norges Bank ones.”
The new fund will also apply BlueBay’s integration and engagement strategies in addition to screening.
In a statement, Mariann Bendriss, chief financial officer at PKH, said that the fund believes the incorporation of ESG into investing is important for an asset owner with long-term liabilities, as such factors can have economic and investment impacts.
“Viewed in this way, ESG is good long-term risk management,” she added. “In the process, we can also play a role in contributing to sustainable development, something which is also of interest to our beneficiaries.”
PKH is a pension fund in Norway that counts hospitals and employees in the Oslo region as customers and members. It has six employees and uses larger external partners to deliver on investment advisory and reporting, actuarial estimates, accounting and pensions services for its 67,000 members.
Ngo said the development of the fund illustrated the development of interactions between asset managers and asset owners, which she said would become more collaborative.
“It was a three-way partnership process really,” she said, including consultant Mercer. She noted that PKH had shown an “openness and willingness to consider other approaches”.
Developing a product with a clear focus that could also be consistent with the philosophy and approach taken by NBIM – a highly influential investor within Norway – was important for BlueBay, added Ngo.
The new ESG high yield bond fund is part of a growing trend of ESG-minded investing in fixed income, and generally in asset classes beyond equities.
BlueBay has operated an ESG investment risk management framework since 2013, applicable to all its assets (US$50bn, €47bn). The ESG investment strategies it applies as standard are integration and engagement, with negative screening based on corporate credit’s involvement in controversial weapons.