M&G is to funnel £5bn of its with-profits fund into private firms working to create a more sustainable world.
The giant fund house has created Catalyst — a 25-strong global team with a presence in London, Singapore, New York and Mumbai — to run the investment, which will be made from the £136bn Prudential With-Profits pension fund, including PruFund.
Some 5m UK customers will therefore see part of their long-term savings channelled into meeting the demand for capital from innovative, responsible enterprises, which M&G says are currently underserved by the market.
John Foley, chief executive at M&G, said: “More and more customers are asking us to make a positive difference to the world through sustainable investment, while also seeking good financial returns to underpin their retirement.
“Many of the most attractive opportunities to do this are in private assets – new and existing companies and platforms which are not listed on an exchange.
“As a cornerstone investor in such enterprises, M&G can have a much greater influence in supporting their growth and on sustainability than we can in public markets.”
Examples of investments in the pipeline for the new mandate include SME and consumer financing, such as microfinance and trade receivables, affordable housing and energy from waste facilities, alongside technology investments with a positive social or environmental purpose.
They will add to the already diverse range of asset types which form the PruFund portfolio.
Newly-formed Catalyst will sit within M&G’s private and alternative assets business, which currently manages more than £65.5bn in private credit, private equity and real estate on behalf of Prudential policyholders.
The team will have a broad impact focus encompassing environmental, social and governance risk management through to positive impact for vulnerable groups.
It will also use screening — excluding certain sectors from the portfolio, such as gambling, tobacco and controversial weapons.
ESG investing has boomed in popularity in recent years as fears over climate change have led investors to consider the impact of their money and as a growing number of millennials have begun investing.
Recent data from Morningstar showed global assets in sustainable funds hit £1.21trn by the end of 2020, a record high, after investors pumped £111bn into such funds in the final quarter of the year alone.
Just this week River & Mercantile’s top boss, James Barham, told FTAdviser it was “critical” asset managers doubled down on ESG and sustainability work in order to survive, warning those that sidestepped the issue would struggle in the coming years.
imogen.tew@ft.com
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