Stockholm (NordSIP) – Dedicated sustainable options within the realm of private debt are few and far between. This week, the family got a little bigger as M&G’s private assets division launched a sustainable senior secured loan fund. According to the press release, the new strategy is designed to give institutional investors access to private credit’s best-in-class companies from an environmental, social and governance (ESG) perspective. The M&G Sustainable Loan Fund boasts an explicit sustainability objective alongside its financial one. To deliver on those, an experienced duo of managers, Fiona Hagdrup and Thomas Lane, is backed by a 23-members-strong leveraged finance team with a long track record in loan investing as well as extensive firm-wide sustainability and stewardship resources.
The fund is seeded with a 175 million Euros investment from the Prudential With-Profits Fund. In addition, the Swedish government employees’ pension fund, Kåpan Pensioner, has committed an initial 26 million Euros to the strategy. NordSIP reached out to Marie Giertz, CIO of Kåpan Pensioner, and Robert Heaney, Head of Nordics at M&G, to hear more about their cooperation around the new venture.
“Sourcing sustainable fixed income products in general, and private debt in particular, is not easy, even if things are moving forward,” comments Giretz. “We have been investing with M&G for a long time now and are very happy with the cooperation. They have always been responsive to our need for incorporating sustainability in all our investments, including the fixed income portfolio. Moreover, the way M&G and Kåpan work with various ESG criteria is a good match,” she adds.
Commenting on the launch and the cooperation with Kåpan, Heaney takes us back to the origins of the new product. “A couple of years ago, we signed a large segregated leveraged loan mandate with a large Nordic institution that has strict ESG and sustainability criteria. The work we did for this specific client on that mandate, together with the input from Kåpan’s own sustainability framework, helped us greatly when formulating the new pooled Sustainable Loan Fund which has just launched,” he explains.
According to Heaney, the focus for M&G’s business in the Nordics, worth over 4 billion Euros, has always been private and alternative assets, with leveraged loans, alternative credit, real estate, and infrastructure equity forming the bulk of the firm’s mandates with Nordic institutional investors. “Given this, and the fact that Nordic investors are amongst the most advanced in the world when thinking about and incorporating sustainability into their investment processes, M&G has benefitted greatly from the strong dialogue we have with clients in these asset classes when it comes to looking at sustainability with alternatives,” he adds.
Heaney is also careful to point out that it is not the first time Nordic investors have provided seed capital for explicitly sustainable M&G’s funds. He reminds us of other examples, such as the M&G Impact Financing Fund, launched in 2018, which at the time was Europe’s first private debt impact fund, and the ESG Global High Yield Fund launched in 2019.
“Getting external seed capital for new strategies is never easy,” shares Heaney. “However, if you have a strong track record in specific asset classes and are willing to engage with investors in detail on how sustainability can best be incorporated into the investment process, this mutually beneficial dialogue can make discussions around seed capital much more productive,” he concludes.