The Impact Funds Mandate comprises three SDG-focused funds and will be accessible to a wider range of existing clients with a minimum investment of €50,000.
Dutch bank ABN Amro has this week launched its Impact Funds Mandate, a wrap account being offered to existing clients, comprised of three funds targeting investments aligned with one or more of the UN’s Sustainable Development Goals (SDGs).
The ABN Amro Aegon Impact Equity Fund, ABN Amro High Quality Impact Bond Fund and Privium Sustainable Impact Fund, which invest across equities, fixed income, alternatives and cash, are all classified Article 9 with a focus on both listed and unlisted investments across a range of sectors including renewable energy, retail, healthcare, insurance and telecoms.
Speaking to Impact Investor, Jan Willem Hofland, ABN Amro’s head of investment sales in the Netherlands, said that up until now, clients had been able to access the bank’s impact investment portfolio to invest on a stock-by-stock basis. But, he said, with a minimum investment threshold of €2.5m, this had restricted the range of clients able to invest, and attracted principally, philanthropic capital.
Hofland explained the company had decided to create a wrap account for its impact investment assets as it offered greater liquidity, particularly for investment into green and social impact bonds, and opened up access to a wider range of clients by lowering the minimum investment threshold to €50,000.
“Because of our size, it can be difficult to take a large stake in companies without affecting the stock price. This creates problems with the regulator since we’d be unable to offer the same advantages to all our clients over time,” he explained. “By pooling all the assets in a wrap account, we can create liquidity and steadily build up our positions in various stocks, giving all investors in the mandate the same level of exposure at the same price.”
The Impact Funds Mandate offers clients access to the same portfolio of impact investment assets as were already on offer, but instead of taking a direct stake in the underlying assets, clients invest on a portfolio-wide basis, akin to a pension fund, with their exposure to various asset classes managed by ABN Amro’s investment team in line with their risk-return profile.
“Our Impact Funds Mandate ties in brilliantly with our services in the impact investing arena, and now allows people making a smaller initial investment to opt for an investment portfolio comprising companies that can make a quantifiable positive impact. This way, we help our clients make an impact and accelerate the transition to a circular economy and net zero,” added Hofland.
Meeting impact investment demand
Hofland said a new requirement, which came into force under existing MiFID II rules in August last year, mandating that financial firms ask their clients about their sustainability preferences, had revealed that 8-10% of ABN Amro’s private banking clients wanted to invest in impact investment assets.
“The launch of our new Impact Funds Mandate with its lower investment threshold, means that we can now meet that demand,” he said, adding that in 3-5 years he expected more clients to invest a large part of their wealth into impact assets, as the longer performance track record of the asset class assured investors of its ability to generate both impact and a return on investment.
Impact due diligence
ABN Amro has both a dedicated ESG and impact investment team conducting due diligence on the stock selection for the mandate, with impact analysis acting as a second layer of due diligence once stocks have been screened on an ESG basis.
“The ESG analysis helps us to reduce the investment universe significantly and ensures that stocks that may score highly on impact but poorly on a range of ESG criteria do not get in through the side door,” added Hofland.
The firm has stated that at least 90% of the mandate’s portfolio – excluding cash – has to comprise investments that have, as an objective, a positive impact on the environment and society, and that the sustainability indicators monitored will include ratings agency Sustainalytics’ average ESG risk rating for the portfolio, carbon emissions, alignment with the Paris Climate Agreement, and alignment with the UN SDGs.