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(Bloomberg) — An asset manager whose top-ranked ESG funds are among just a handful to have survived a mass wave of ratings downgrades says money is the motive behind his environmental, social and governance strategy.
“This is about making money,” said Bjarne Graven Larsen, a former chief investment officer of Ontario Teachers’ Pension Plan who founded Qblue Balanced A/S in 2018.
“We have not tried to optimize ratings,” Graven Larsen said in an interview. “We’ve tried to come up with a way of investing in companies that in our view create societal value” and “that we think will profit from that.”
ESG is a tool through which to find assets that “will be profitable — very profitable — in the future,” he said.
It’s an approach that’s too often either overlooked or misunderstood as the debate surrounding ESG grows increasingly “emotional,” Graven Larsen said.
He’s among asset managers struggling to make sense of the furor surrounding ESG, as the investing form gets entangled in US politics. Republican lawmakers are stepping up their attacks on ESG, and have put forward dozens of bills across state legislatures to stop businesses and investors from taking ESG risks into consideration. The tone of the debate has made it hard to talk about ESG, according to Graven Larsen.
“It has almost been a topic globally where you have to be very careful about how you express yourself,” he said. “Because it’s not always that people have the time to listen to the facts.”
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Qblue’s Navigera Global Sustainable Leaders Fund (Ticker: LEADGLO SS) has beaten 91% of its peers over the past year, according to data compiled by Bloomberg. The fund is classified as Article 9 under the European Union’s Sustainable Finance Disclosure Regulation, which is the framework’s highest ESG designation. And unlike some of the investment industry’s biggest asset managers, Qblue didn’t resort to Article 9 downgrades at the end of last year.
Two Qblue funds are now among just 0.2% of investment portfolios that still carry a AAA ESG grade at MSCI. The index and research provider said earlier this year that downgrades would hit 31,000 funds and leave hardly any AAA rated funds, compared with 20% previously. MSCI said it needed to implement the ratings cuts after clients made clear they were concerned that its previous methodology encouraged an “upward drift” in scores, suggesting that actual ESG risks were being downplayed.
The MSCI downrades have hit some of the world’s biggest ESG exchange-traded funds. That includes the three biggest ESG ETFs, which hold roughly $30 billion in combined client assets and are all provided by BlackRock Inc., as well as the biggest ESG ETF offered by Vanguard Group, a product that holds about $6 billion in client assets.
Graven Larsen said Qblue is now in talks with a number of third-party distributors who have expressed interest in his funds after it emerged that they’re among the ESG market’s top-rated.
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