06 August 2019
M&G's Impact Financing Fund was billed when it launched last year as the first fund to invest predominately in private and illiquid debt to achieve a positive social or environmental impact.
The fund, which has grown to more than £60 million ($73 million), is designed to offer returns "in excess of public markets" in addition to providing positive environmental and social impact, in a strategy that could be scaled to a multi-billion size over time, according to M&G.
Seed investors in the fund include M&G Prudential, Big Society Capital and The Swedish Foundation for Strategic Environmental Research.
Awards judges welcomed the entry to market of an "institutional-grade fund with potential to scale up".
It has so far deployed about one-third of investors' capital into 22 private and illiquid impact investments – with the remainder temporarily in public liquid assets that meet certain criteria, M&G said.
Richard Sherry, manager of the fund, says: "One area where we have seen good value is in social housing, where we hold the senior debt of six housing associations, which between them manage over 30,000 homes.
"We have also financed green buildings and deployed capital into renewable energy generation assets, through offshore wind farms, [offshore] transmissions cables and rooftop solar deals."
In 2018, the fund reported total annual greenhouse gas emissions reduced or avoided of 3,050 tonnes of carbon dioxide equivalent.
The investment universe covers a broad range of environmental and social impact themes including: renewable energy generation; energy efficiency; pollution control; water; waste management; green transportation; sustainable food, agriculture and forestry; green buildings; health and social services; education; social housing; and economic inclusion.
A four-person impact financing portfolio management team conducts an impact assessment on all potential investments for the fund, and makes the final decision on which investments are made. This team is supported by a credit analyst team and origination specialists.
ESG specialist research and ratings provider Sustainalytics advises the fund's managers, who can call on Sustainalytics resources to help make an assessment of the impact of potential investments.