Aberdeen Standard Investments will soon make an initial public offering for an investment trust it says will transform sustainable finance.
ASI has been gathering expressions of interest for the trust which has a target size of £200m and capacity for initial investments of up to £350m.
The trust will invest primarily in private markets and only in companies making a positive impact in line with the United Nations’ Sustainable Development Goals.
Andrew Dykes is founder of the Global Sustainability Trust initiative and will be deputy chair of the trust’s board.
He says: “We are democratising SDG finance. People should have more and better opportunities to align their investments with their values.
“One way to do that for people that want to do impact investing is getting access to private markets, and pure-play investments. The man and woman on the street cannot invest in Nordic hydro-electric directly, you have to bring it in to a low-cost pooled vehicle.”
Annual management for the trust will cost clients 87 basis points in the first year rising to 102bps in the third year. The base management fee is 70bps, decreasing to 65bps when the trust’s assets pass £200m.
Target net returns will be between six and eight per cent per year.
ASI global head of private markets product strategy and solutions Roger Pim says: “Rather than us deciding what the needs of the world are we are relying on the UN SDGs which provide a really helpful framework. They were designed for governments though and are not investable per se so at ASI we have created eight impact pillars.”
These are sustainable energy, circular economy, water and sanitation, food and agriculture, health and social care, education and employment, sustainable real estate and infrastructure, and financial inclusion.
Pim says there are over 400 people on the private markets team at ASI and they will be looking at investment opportunities with a positive impact linked to one of the pillars.
Heading the trust’s management will be Pim, head of global ESG investment research Amanda Young, head of private market solutions Nalaka Da Silva and investment director Sarah Norris. There will be oversight from an independent board including Dykes and Iain Henderson, head of international cooperation at the UN environment inquiry team.
Pim says there are benefits to investing in small private companies rather than listed companies: “[They] tend to focus on one core area, in contrast to the listed space where you get quite large companies and some things you could say they are doing are good and some things bad.
“You end up trying to net off good against bad and come up with a net score. What we are identifying groups solely focused on positive areas.”
He adds the trust will be a very active investor.
He says: “In over half the cases here we are investing directly and in most of those cases we will have a majority, if not 100 per cent, of the company. So we have controlling positions which let us not only steer strategy but also on the reporting measurements of those impacts we can stipulate exactly what we need.”
The fund will go live 17 December and the deadline to apply is 11 December.
Julian Parrott, partner at IFA Ethical Futures, says he is looking forward to what this investment trust will mean for his clients’ portfolios.
“It provides access to investment at a low level [from £500 per person] to a range of sophisticated and truly impactful assets.
“To date, the only way for individual investors [to achieve a stronger positive impact] has often been by way of direct investment into unregulated community benefit societies or share offers such as Café Direct, Ethical property Co and Traidcraft. These investments were often deemed as quasi-philanthropic with a ‘sub-market’ return.
“There have been a range of investment funds which are invested for real impact on a global scale. However, these have had very high initial thresholds, often in excess of £500,000 and therefore were the preserve of the ultra-rich.”
This article was first published by Money Marketing on 4 December 2018: