GLOBAL - Pictet Asset Management is to launch a pooled fund for institutional investors following growing client demand for environmental, social and governance opportunities.
The asset manager, which already has £12bn ($19.6bn) invested in its separate water, clean energy, timber and agriculture vehicles, said the Environmental Opportunities fund would collect together the best ideas from its four existing thematic funds to offer a "one stop solution" for investors.
Pictet has been running the strategy as separate mandates for several institutional investors for some time, but decided to launch a pooled fund as a result of growing demand.
Chief marketing officer Simon Males said all RFPs now include environmental, social and governance requirements, but he had seen this awareness move forward with pension funds wanting to invest in ESG directly.
Males added: "This is not an asset class, this is an investment strategy and we believe very firmly that over the long term, investing in megatrends in secular themes will maximise your return constructed in an appropriate way without being driven or constrained by a benchmark, rather simply to maximise return.
"The fund will be a one-stop solution dedicated to institutional investors who wish to invest in sustainability. The key decision here is rather than narrowing or confining a universe using an investment process which has negative screens, which may be appropriate to the DC market or retail investors, this approach fundamentally meets the requirements of the fiduciary duty of trustees and pension fund managers to maximise total returns for fund members.
"It also meets the obligation of trustees to consider investing in a responsible way, to consider ESG risk and environmental opportunities."
Research published by Mercer earlier this year warned pension funds should factor in climate change risk to their asset allocation strategies over the next two decades or face losing trillions of pounds. (Global Pensions: 15 February 2011)
The consultant said climate change policy will account for 10% of a pension fund's portfolio risk by 2030, with costs hitting about £5trn by 2030.
It added funds could combat the growing policy risk headache by diversifying their portfolios away from equities and bonds into "climate sensitive" assets such as infrastructure, real estate, private equity, agriculture land, timberland and sustainable assets.
Mercer forecasts a portfolio trying for a 7% return could cancel out the climate change risk by allocating 40% of its funds to these assets.
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