Pathfinder gets into bonds - green and orange

Ethical investment provider Pathfinder has entered the global fixed income market with the launch of a green bond fund.

Wednesday, February 22nd 2023, 7:51AM

The Pathfinder Green Bond Fund, the first retail fund in New Zealand to invest solely in green bonds, will form part of the Pathfinder KiwiSaver fixed income allocation as well as being available to regular investors.

Pathfinder chief investment officer Paul Brownsey says until now Pathfinder had no exposure to fixed income due to the risk of low interest rates rising sharply.

“With interest rates back up we think it’s a good time to go into bonds. So that’s part of the timing for this PIE fund.”

Brownsey says the new green fund will be Pathfinder's preferred way of fixed income investing for its KiwiSaver fund; around 12% for conservative risk and 5% for growth.

Pathfinder’s Green Bond Fund (hedged in New Zealand dollars and charging a 0.6% management fee) invests in bonds and companies that allocate capital for green purposes including clean transportation, clean water, renewable energy, and climate change solutions. Each bond reports on both the financial and environmental impact achieved. The bonds also support the United Nations Sustainable Development Goals. It is benchmarked to the Barclays Global Aggregate Index.

PIE out of wholesale

The new green fund comes out of a wholesale mandate launched by Pathfinder last year with substantial seeding of an undisclosed amount by philanthropist Anna Stuck.

Brownsey credits Stuck as the driving force behind the new green fund, which comes out of a wholesale vehicle launched with her seeding last December.

“She’s committed to impact investing across everything she does. Without her I don’t think we would have been able to start this fund or at least not start it in this form so we’re really excited to be working with Anna to bring this bond to our own investors and other people.”

Stuck says the targeted and measurable impacts from international green bond funds, and the interest from investors in impact investing, captured her attention. Stuck, is the founder of the Clare Foundation in 2021, a $35 million charity which aims to give away all its money by 2031.

Pathfinder partnered with London-based sustainable bond specialist Affirmative Investment Management on green bond selection. Affirmative is a recognised by the Responsible Investment Association of Australasia (RIAA) as a responsible leader and was also the only asset manager of 31 assessed by Morningstar to be awarded an ESG commitment level of “Leader”.

Orange bond allocation

Pathfinder KiwiSaver fixed assets will also include the lesser known asset class of orange bonds, with the fifth and sixth issue of the Women’s Livelihood Bond (WLB) series run by Singapore-based Impact Investment Exchange (IIX). Orange bonds (orange is the colour of UN sustainable development goal five of gender equity) aim to lift families and communities out of poverty through improving the capital rights of women. IIX has raised US$50 million for the fifth bond which will support 300,000 low income women and girls in Asia and Africa.

IIX launched the first of the series in 2017 - the world’s first gender-lens, impact investing instrument to be listed on a stock exchange (Singapore Exchange). WLB1 matured in July 2021, with all coupon payments and principal payments made, despite the impact of COVID-19.

The series, WLB 1, WLB 2, WLB 3, and WLB4Climate mobilised US$78 million of private sector capital helping low-income, rural, and financially excluded women to transition from subsistence to sustainable livelihoods. Previous bonds in the series have provided returns of 3-4%.

Tags: responsible investing