Finnish pension fund manager Varma Mutual Pension Insurance Co., Helsinki, is investing $50 million with HSBC Asset Management in a new emerging markets corporate bond fund to advance sustainability goals and diversify from government bonds, the firms said Thursday.
The global EM corporate sustainable bond fund meets the European Union's highest classification, Article 9, under a sustainable finance taxonomy. The fund will invest 60% in Latin America and roughly 20% in Asia, focusing on financials, consumer staples and basic raw materials sectors.
Varma managed €56.4 billion ($54.9 billion) at the end of September. It made the seed investment in the emerging markets corporate bond fund to supplement its emerging markets portfolio and to further integrate sustainability into those investments, Varma said in a news release.
It also diversifies a portfolio made up largely of government bonds, Petri Ala-Härkönen, Varma's director of fixed income, currencies and commodities, said in the firm's release.
The new fund investing in corporate bonds "takes careful consideration of the related sustainability aspects. The fund invests only in companies whose profile is considered to be improving from a sustainability standpoint," Mr. Ala-Härkönen said, and it will exclude investments in highly polluting and dubious industries, such as coal companies, inefficient energy companies and the tobacco and weapons industries.
In its own announcement, HSBC Asset Management said the HGIF Global Emerging Markets Corporate Sustainable Bond fund will be overseen by L. Bryan Carter, head of emerging market debt and managed by Caroline Keany and Julio Obeso, senior EM corporates portfolio managers.
The fund strategy will integrate sustainability objectives into its analysis along with continuous engagement focused on driving positive change in emerging markets. Companies unable to improve the sustainability of operations will be divested, HSBC AM said.
"Emerging markets are at the epicentre of sustainable investing, a just transition and Paris alignment. As investors, we believe direct and consistent engagement with emerging market issuers can offer opportunities for assessing their ESG plans and progress, their challenges and gaps, and to help drive positive change," Mr. Carter said in the release.
