Four of Europe’s 10 largest SDG funds – which are tied directly to the UN’s sustainable development goals – are based in Luxembourg, according to research by the financial services firm Morningstar.
These include funds instituted by the German asset management company DWS Group, the Dutch investment management firm Robeco, the American portfolio manager Columbia Threadneedle Investments and the Luxembourg-headquartered Nord Est Asset Management.
SDGs are a set of 17 global objectives adopted by the United Nations in 2015 as part of the 2030 Agenda for Sustainable Development. They aim to address some of the world’s most pressing challenges, including poverty, inequality, climate change, environmental degradation, peace and justice. The SDGs provide a framework for governments, businesses and individuals to work collaboratively towards the goals.
For the research, Morningstar screened open-end and exchange-traded funds for the terms “sustainable development”, “SDG” and other related terms. From the list that emerged, the researchers excluded funds that did not disclose their holdings. The final list was narrowed down to 44 and Morningstar has published the list of the 10 largest funds.
The funds
The largest of these funds is domiciled in Ireland and is managed by the American firm Northern Trust Asset Management. The fund, according to its prospectus, seeks to track an MSCI low carbon impact index. Some of its top holdings include Microsoft and pharmaceutical giants like Eli Lilly, Novo Nordisk and AstraZeneca. The total size of the fund is $4.7 billion.
The second fund on the list, based in Luxembourg, is DWS’ SDG global equities fund. It seeks to invest in companies that “provide a positive contribution to at least one of the 17 SDGs”, according to its prospectus. Among its top 10 holdings are First Solar, the American solar panel manufacturer, and Veolia Environmental Services, a company that specialises in waste reduction. With a total size of $1.9 billion, the fund focuses heavily on the healthcare and industrial sector.
The other funds on the list that are based in Luxembourg include Columbia Threadneedle’s SDG engagement global equity fund, which has a size of $1.2 billion. Its top holdings include the sustainable packaging firm Smurfit and the waste management company Waste Connections.
The final Luxembourgish fund on the list is Nord Est Asset Management’s Ethical Global Trends fund with a size of $899 million. It invests about 10% of its holdings in carbon solutions including renewable energy, green buildings and green transportation, according to Morningstar.
More in the future?
While the analysis found only 44 funds that specifically invest in the SDG theme, Mornigstar is hopeful that will change. It said that in a separate survey it found that investors are keen to see a policy environment that supports businesses that are trying to move towards SDGs.
But, in the current environment, SDG themes are separate from ESG (environmental, social and governance) themes, which play a much larger role in fund managers’ decision making. However, according to Lindsey Stewart, director of stewardship research and policy for Morningstar Sustainalytics, the two are interlinked.
“If the SDGs represent the destination, as agreed by the U.N.’s member states, then the metrics that indicate progress on ESG themes are important mile markers on the route. If you don’t see those, you’re probably on the wrong highway,” he wrote in an article in September.
Also read:Fund industry raises red flags over EU’s green rules
ESG investing in Europe has also encountered challenges. An investigation by the Luxembourg Times, along with ten other European publications in April, found that 43% of funds labeled as “sustainable” in Europe continue to invest in fossil fuel companies
Also read:Clock is ticking to clean up EU’s new green rules, Luxembourg regulator warns
The European regulator European Securities and Markets Authority (Esma) recently published new rules to prevent greenwashing and to ensure that funds labelled as sustainable are actually sustainable. But, these rules also come with some problems and may have some unintended and counterintuitive consequences, the fund industry and Luxembourg’s financial regulator have pointed out.
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Publish date : 2024-10-09 16:07:00
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