First Sentier Investors has launched a private debt strategy that is initially focusing on loans to the renewable energy sector.
The sustainable debt strategy has attracted a cornerstone investor that has made a financial commitment through a standalone First Sentier Investors managed trust structure. The first tranche of loans to renewable energy projects settled in April. First Sentier did not name the investor and did not identify the size of the investment.
First Sentier is leveraging its relationship with parent company MUFG Bank, as part of the broader group-wide approach around ESG.
"The relations we've built up with MUFG have allowed us to broaden out that capability," says Tony Togher, head of fixed income, short term investments and global credit at First Sentier Investors.
Togher will lead the strategy for First Sentier Investors.
He notes the collaboration with MUFG Bank in sourcing potential loans leverages the firm's strong track record in credit risk, and the initial tilt towards renewable energy assets came as a result of the due diligence process.
"We're already reviewing the next set of available loans," Togher says. "Hopefully, they make it through the due diligence process and they'll be included in the portfolio.
"For many years we have had growing interest from clients, and they have constantly knocked on the door looking for these types of assets, so we deliberately went out looking at the renewable sector to determine availability, access and size."
MUFG Bank is one of the largest lenders to the renewables sector in the Asia-Pacific region, with a strong pipeline of opportunities, First Sentier Investors notes.
"The successful launch of this initiative represents another exciting step forward for MUFG's sustainability financing vision by delivering on two key strategic priorities - those being an absolute commitment to ESG/sustainability-linked financing, as well as creating new channels for the distribution of loan assets," says Siong Ooi, MUFG Bank's co-head of debt capital markets. "We anticipate that there will be strong investor demand for this type of asset. MUFG Bank will seek to originate and structure future investment opportunities for First Sentier Investors to meet this demand."
The establishment of the private debt capability means First Sentier Investors will be able to offer its investor base exposure to a diversified portfolio of ESG/sustainability-linked loan assets, and strategic access to the loan asset class, beyond the traditional bank market.
MUFG has committed to investing JPY20 trillion yen (AUD 238billon) into sustainability related financing globally by 2030. MUFG achieved 19% of this target being achieved in its first year of the strategy - the 2019 financial year, ahead of target, and MUFG recently announced that it has raised this target to JPY35 trillion yen (AUD 417billion).
First Sentier Investors manages A$237 billion in assets (as at 31 March 2021) on behalf of institutional investors, pension funds, wholesale distributors, investment platforms, financial advisers and their clients worldwide.