EXCLUSIVE: Mediolanum's Funds Business Targets Climate Change; Firm Mulls Chinese Economy

Amanda Cheesley Deputy Editor 23 October 2023

EXCLUSIVE: Mediolanum's Funds Business Targets Climate Change; Firm Mulls Chinese Economy

Investment managers at Mediolanum International Funds (MIFL) discuss their latest funds at the recent MedMe event in Dublin, and highlight why they have stepped up action to tackle climate change. They also talked about Chinese equities and debt against the background of the country's shifting economic fortunes.

A European investment house has rolled out a range of ESG-focused funds, arguing that tackling human-caused climate changes remains an urgent challenge. Separately, it reflected on the sort of asset allocation that makes sense around China.

Furio Pietribiasi, CEO of Mediolanum International Funds (MIFL), highlighted at the firm’s 25th anniversary event in Dublin this month how it has launched nine ESG-focused funds. (This news service was in Dublin to also take the temperature of the country's wealth and asset management sector. See here.)

The funds come under Articles 8 and 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR). “We wanted to wait to launch the funds under Articles 8 and 9 of the SFDR and have been developing strategies that fit the criteria to help firms transition,” Pietribias told this news service in an exclusive interview.  

“We wanted to provide our clients with access to ESG-focused funds and we do this by delegating it to specialists. We mainly target climate change to have a greater impact,” Christophe Jaubert, chief investment officer at MIFL, said. 

A report by Allfunds Data Analytics presented at the event shows the growth of sub-advised funds in the funds industry, with ESG funds driving that growth. MIFL said it experienced a 94 per cent increase in ESG mandates, making it the industry’s highest growth among the funds' platforms belonging to banking groups, both on a one-year and three-year basis. See more here

At the same event, Imna Conde head of ESG at MIFL told this news service that they had one ESG-focused fund in 2018 and to manage it they set up a specific committee in 2022. “Now we have nine ESG-focused funds, with another two in the pipeline,” she said. “Climate change is the biggest trend for us and we try to align the funds with four of the UN’s Sustainable Development Goals (SDGs), focused on climate action, gender equality, affordable and clean energy, and responsible consumption and production,” Conde added. “To measure the impact across these, we have mapped six principal adverse impacts (PAIs),” Conde continued.  

While the ESG trend has had its fair share of bumps in the road - such as the lag of "green" funds behind those investing in fossil fuels during 2022, when the Russian invasion of Ukraine roiled energy markets, and the problems of "greenwashing", the phemonenon appears to retain momentum. High temperatures in parts of the world during summer, with forest fires in southern Europe, for example, and other concerns, kept the topic high on the political and media agenda. An issue is that cutting carbon emissions has become politically more difficult as the costs of transition coincide with a period of rising inflation.

ESG-focused funds
Funds under Article 9 of the SFDR include MBB Energy Transition and MBB Future Sustainable Nutrition. “The fund is co-managed by Black Rock and Pictet, who have experience in this theme and also have very different views on how to approach the sustainable nutrition theme,” Conde said.

The fund aims to provide investors with exposure to the sustainable nutrition theme and the evolution of a new food system which addresses the unsustainable health, climate and waste problems of the current worldwide food production system.

MIFL highlighted that food systems account for over one third of global greenhouse gas emissions, with 45 per cent of food produced lost or wasted. Yet in 2020, between 720 and 811 million people faced hunger, rising from 2014. With the world population set to hit 10 billion by 2050 and the food system accounting for 30 per cent of emissions, MIFL said precision agriculture which optimises crop productivity is a key tool for achieving this. It will enable farmers, for instance, to target their fertilizer application more precisely. Adopting this technology is expected to accelerate in the future.

This news service has carried a number of articles recently about how wealth managers are paying more attention to food production and its demands. Population pressures, wars, supply chain disruptions and the impact of new technologies have shaken up the space. See here and here.

Asia-focused funds
Pivoting away from ESG issues, the firm also talked about its approach to the Chinese economy. 

Jaubert said that MIFL has around 70 different funds, which are balanced between fixed income and equities. The firm is neutral in equities and slightly overweight in duration, he added.

Of these funds, the GAMAX Asia Pacific Fund predominantly invests in equities in the Asia-Pacific region, including emerging Asian economies, such as China. Top holdings include Chinese tech giant Alibaba and Taiwan Semiconductor Manufacturing Company (TSMC) which posted better-than-expected earnings in the third quarter of 2023, helped by strong demand for artificial intelligence (AI) chips.

Jaubert told this news service that they also recently launched a China Equity Fund, which is continuing to grow, and an Indian Equity Fund this year, with India touted as one of the world's fastest-growing eonomies. See more here.

The China fund is co-managed by Steven Luk, CEO of Hong Kong’s FountainCap Research & Investment, which focuses on investing in Chinese equities. Luk believes that robotics, automation, healthcare and renewables will shape China’s future. With the country producing more than 70 per cent of all solar photovoltaic panels, half of the world’s leading electric vehicles and a third of its wind power, he has direct exposure to renewables, notably solar. He also likes consumer goods, such as sportswear, and said that the food and drinks sector continues to grow.

Despite concerns over China’s slowing economy, he said it is currently in a down cycle. “It’s been there before and every time the market pulls through,” he told this news service. There are also early signs that the economy is improving, Luk added.

Latest figures show that China’s GDP growth in the third quarter of 2023 exceeded economists’ expectations, reaching 4.9 per cent year-on-year, putting Beijing’s 5 per cent 2023 GDP growth target within reach. The quarter saw a sharp increase in retail sales, particularly for restaurants, alcohol, and cars, offsetting a drag from the property market. Luk believes that now is a good time to invest in Chinese equities.   

MIFL is a management company approved by the Central Bank of Ireland to manage UCITS or undertakings for the collective investment in transferable securities, which are investment funds regulated at EU level, and non UCITS funds.  

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