Northern Trust AM Australia shares in $4.3bn climate transition mandate

Northern Trust Asset Management Australia is one of several fund managers that scored a major mandate from Taiwan's Bureau of Labor Funds (BLF) to help manage a total pool of US$3 billion ($4.3bn) for a climate transition investment strategy.

The BLF also picked Amundi Asset Management, BNP Paribas Asset Management Europe, Geode Capital Management and State Street Global Advisors Singapore to help manage the Global Climate Transition Passive Infrastructure Securities strategy.

Each fund manager will be allocated US$400 million ($571m) from the Labor Pension Fund, US$100 million ($143m) from the Labor Insurance Fund, and US$100 million ($143m) from the National Pension Insurance Fund. The mandate term will last five years.

The fund managers will use the FTSE Global Core Infrastructure ex China TPI Climate Transition Index as their benchmarks, targeting companies with forward-looking climate transition management capabilities.

Through a passive investment approach, the BLF said the mandate aims to participate in the global infrastructure market at a relatively lower cost, while serving the dual objectives of supporting companies in advancing structural transition and capturing investment growth opportunities.

The fund managers will also aim to achieve the long-term objectives of the Labor Funds and the National Pension Insurance Fund, which are to consistently earn stable returns.

"This mandate aligns with international trends by focusing on climate transition infrastructure, combining stable income characteristics with structural growth in electricity demand. It aims to strengthen the balance of alternative investments within the overall portfolio, enhance diversification, and simultaneously support corporate transition while capturing investment growth opportunities," the BLF said.

This is against the backdrop of the rapid development of artificial intelligence (AI), cloud computing, and the digital economy, investment opportunities in related infrastructure have been expanding. "Such assets typically feature stable cash flows, essential demand, and resilience to economic cycles, which help generate long-term returns while enhancing portfolio defensiveness. In addition, under the global energy transition trend, power and related infrastructure are gradually shifting toward low-carbon development," the agency said.

In March, the BLF put out a tender for its global passive fixed income investment mandates under the Labor Pension Fund and the National Pension Insurance Fund, seeking four external managers. Each fund manager will be entrusted with US$300 million ($428m) from the Labor Pension Fund and US$100 million ($143m) from the National Pension Insurance Fund. This mandate totals US$1.6 billion ($2.3bn) and will also span five years.