Low-Carbon Investments Have 'Critical Mass', says Europe's Largest Asset Manager Amundi
Investment into low-carbon activities worldwide has reached a “critical mass that is unstoppable”, even as U.S. policy lags behind, according to Europe’s largest asset manager, Amundi SA.
“The low carbon indexes that we launched have outperformed since the election of Donald Trump, so that says something in terms of investors being ahead of the curve,” Frederic Samama, deputy global head of institutional and sovereign clients at the Paris-based firm, told BNEF in an interview.
Amundi, which globally manages more than 1 trillion euros ($1.09 trillion), has partnered with International Finance Corp. to capitalize on the opportunity for green bond issuance in emerging markets. On April 21, the two entities launched a $2 billion green-bond fund solely dedicated to emerging economies, which aims to “send a signal” to local banks that there is “growing demand for green bonds,” said Samama. The fund will buy green bonds from banks in Africa, Asia, Latin America, Eastern Europe and the Middle East.
Unlike developed markets, where institutions are advanced in financing the so-called green economy, in less developed markets there is a lack of knowledge about issuing green bonds, and a lack of demand for issuance. The new Green Cornerstone Bond Fund hopes to change that, said Samama.
“There is a huge appetite” for green bonds among investors – notable by the rapid growth of the market to more than $100 billion in 2016 and the oversubscribed nature of sovereign green bonds in particular, said Samama. This new $2 billion fund will “help accelerate” the market, in part helped by a technical facility provided by the IFC to cover the additional administration cost of issuing green bonds.
The IFC will invest as much as $325 million in the new fund, while the remainder will come from Amundi’s institutional investor base worldwide. It may take as many as seven to completely fulfill the $2 billion mandate for green bonds due to current limitations in the market, said Samama.The newly-created company, Amundi Energy Transition, jointly owned by Amundi and Electricité de France SA, aims to reduce the complexity of investing in real assets such as wind and solar projects, according to Samama. “In this low-yield environment, all investors are interested by the liquidity premium related to real assets,” such as renewable energy projects, he said. By working closely with engineers at EDF, the Amundi team will get notification about new projects and the most promising investment opportunities, Samama said.