Nikko AM may market green bond fund in Asia ex-Japan

After success in Japan with a product that invests largely in World Bank-issued green bonds, Nikko Asset Management has launched a Ucits III version and might offer it elsewhere in Asia.

Japan's Nikko Asset Management plans to offer its Nikko AM World Bank Green Fund to investors in Asia ex-Japan, having just launched a Ucits III version for European and Middle Eastern clients.

"We are considering marketing the fund in Asia [ex-Japan] and very much hope the product will resonate with institutional investors in the region," says Charles Beazley, Europe president at Nikko AM in London. "We are considering registration in Singapore, where we have an office, and Hong Kong." He did not give a likely timescale for when this would happen.

The product is already available in Japan, where it has raised $140 million so far, while the Ucits fund launched in late February with $10 million, Beazley tells AsianInvestor. The first marketing calls are being made and roadshows are being planned, he adds. There is no target return, but the initial yield at inception is over 5%.

The fund can invest up to 100% of its portfolio in green bonds issued by the World Bank, a global development cooperative owned by its 186 member countries. It is likely to be 80-100% allocated to such assets most of the time, and the minimum allocation is 60%.

Green bond-supported World Bank activities include projects that improve energy efficiency, provide alternative energy, fund new technologies that reduce greenhouse gas emissions, and increase reforestation, in regions such as Latin America, Eastern Europe and Asia. 

The organisation plans to issue green bonds in a range of developed- and emerging-market currencies selected by Nikko AM.

The level of issuance depends both on demand for green bonds from investors as well as demand from member countries for loans for eligible projects, says Heike Reichelt, head of investor relations and new products at the World Bank. The organisation has issued $1.4 billion in green bonds since November 2008, and that figure could exceed the $2 billion mark before the end of the year, she tells AsianInvestor.

However, when asked how concerned the World Bank is about a lack of consensus on climate change hampering agreement on rules in this area, Reichelt said the organisation is in no position to comment.

The Luxembourg-domiciled Ucits III fund will be available in sterling, dollar and euro share classes. It will be actively managed by Stuart Kinnersley, Nikko AM's Europe chief investment officer and senior portfolio managers Justin Eeles and Simon Down, who have worked together for over 10 years.

The fund will specifically target a range of international institutional investors, including financial groups, pension funds, banks, family offices and discretionary investment managers.

Nikko AM already has a strong and long-standing relationship with the World Bank, having partnered with Nikko AM's World Supporter Fund launched in 2007. This fund, which is emerging-markets orientated, has already attracted $1.8 billion from Japanese domestic investors.

The Nikko AM World Bank Green Fund is the sixth socially responsible and sustainable investment strategy to be launched by Nikko AM in the past decade.

Other firms, such as Nissay Asset Management, have embarked on similar -- if not precisely the same -- types of green initiatives.

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