Beats | March 20, 2018

European supertankers of finance chart a course to a different future

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All Sophie Robé wants is 5%.

Out of the €11 trillion (US$13.6 trillion) expected to be represented at the 4th Impact Summit Europe this week in The Hague, that could be real money to meet the global Sustainable Development Goals for 2030.

By organizing the event, Robé, the founder of Phenix Capital, an impact investing advisory firm in Amsterdam, has positioned herself as a convener of the leaders in the emerging practice of ‘SDG investing.’ The 17 global goals, which call for an end to extreme poverty, universal access to education and energy and action on climate change, have become a guide to both risk-reduction and growth opportunities for a growing subset of major institutional investors.

Robé said she will challenge the 300 investors and managers in the room in her opening keynote: “If everyone here put just 5% of their discretionary assets to work with the SDGs we will already be able to catalyze more than €500 billion (US$617 billion). Can we do this?”

Among the supertankers of global finance who have been first to shift are California public pension funds, Australian and New Zealand “superannuation,” or retiree, funds, insurance and reinsurance funds and sovereign wealth funds, particularly Norway’s, which at $1 trillion is so massive as to qualify as a category unto itself. Ted Eliopoulos, head of investments for CalPERS, the $357 billion pension fund for California public employees, recently called the SDGs a “gift to investors.”

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At the head of that class are Dutch pension fund managers such as PGGM, which has committed €20 billion to SDG investing; APG, with a €65 billion commitment; and MN, which is directing €5 billion, via an allocation from PME, representing the pensions of metal and electrical engineering industry workers. (see, “Sustainable Development Goals take hold as a universal impact investment framework“).

At the end of 2016, 18 Dutch financial institutions managing more than €2.8 trillion (US $3 trillion) in assets, declared their support for “maximizing ‘SDG investing’” in the Netherlands and around the world. They were quickly followed by a half-dozen of Sweden’s largest institutional investors, including the insurer Folksam and the AP7 pension fund, which declared their intention to align their investments with the SDGs as well, as well as major funds in Australia, Canada and elsewhere (see, “European pension funds tilt toward ‘SDG investing’”).

PGGM said in January that it has invested about €12 billion ($14.9 billion) towards its commitment to invest €20 billion ($24.8 billion) by 2020 in fighting climate change and pollution, food security, healthcare and water scarcity, which correlate to five of the Sustainable Development Goals.

Dutch pension fund moves from impact alignment to impact management

In December, the Norwegian pension fund MP Pensjon, along with the European Union, committed $50 million to Climate Investor One to help finance renewable energy projects in Africa, Asia and Latin America. Climate Investor One was launched by FMO, the Dutch development bank, along with Phoenix InfraWorks, a South African infrastructure investor.

Growth markets

Robé said more than half those at the two-day summit are investors and limited partners. Kempen Capital Management, for example, has recently launched its Global Impact Pool, helping investors participate in a set of funds managed by third-party managers aimed at five Sustainable Development Goals, including Good Health and Wellbeing (SDG №3), Clean Water and Sanitation’ (SDG №6) and Affordable and Clean Energy (SDG №7).

Emerging markets are a key focus, with as much as 90% of the financing needed to meet the 2030 goals are invested in such growth geographies. Mark Mobius, the veteran emerging markets investor who left Franklin Templeton last year, will deliver one keynote. At an event in Mumbai last month Mobius said he is starting a new fund management firm to invest in growth-market companies focused on environmental, social and governance performance.

Alecta, a Swedish pension fund, last year committed $100 million to an emerging markets loan fund managed by FMO, the Dutch development bank targeted at SDG №8, Decent Work and Economic Growth. Magnus Billing, CEO of Alecta, said the fund would track jobs supported, small- and medium-sized enterprises reached and greenhouse gas emissions avoided.

Europe as a whole has taken the lead in crafting a framework for sustainable and climate investing. In January, a “high-level expert group” on sustainable finance adopted financial-systems recommendations, including disclosure about sustainability decision-making, an EU-wide label for green investment funds and a classification to clarify what is “sustainable.” The report and the European Commission’s “action plan” will the subject of discussions this week in Brussels.

Universal Ownership: The supertankers of global finance are shifting course