Above:Dr Steffen Hörter (L) and Alex François
Sydney: 20 June, 2023 – Munich Re Investment Partners, the climate-focussed specialist boutique asset manager and wholly-owned subsidiary of reinsurance company Munich Re, both headquartered in Germany, has launched its first carbon fund in Australia. Munich Re Investment Partners has established a branch in Sydney for the Australian institutional market.
Munich Re Investment Partners is focused on innovative, investment solutions for climate-committed institutional asset owners, that generate lasting financial and environmental value. Munich Re Investment Partners has a dedicated focus on Carbon markets and pricing as well as Climate Transition.
The new Munich Re Investment Partners European Union Allowances (EUA) Strategy fund (the EUA Strategy fund) enables institutional investors direct access to the largest (by far) regulated carbon cap-and-trade market globally – the EU Emissions Trading Scheme (EU ETS). In 2022, the trade volume of globally regulated emission rights rose to a record of about 1.4 trillion AUD – 87% of this volume had been traded through the EU ETS.
Speaking in Sydney yesterday, Dr Steffen Hörter, Member of the Executive Board, said:
‘Carbon is an attractive, rising new asset class. Our EUA Strategy fund is globally one of the first open ended investment funds allowing institutional investors to directly invest into EUAs. By physically investing in EUAs, our investors gain pure EU carbon market beta exposure, avoiding the high costs of other solutions. EUAs have an attractive return outlook. With low correlation to Fixed Income and Equities, EUAs can significantly contribute to portfolio diversification.’
The EU ETS has proven to be an effective tool in driving emissions reductions. Industries covered under the EU ETS reduced emissions by about 43% between 2005 and 2021.
By investing in carbon markets, investors can contribute to real economy decarbonisation.
‘We see a sufficiently high, sector-overarching carbon price as the preferred, technology-neutral policy instrument to reduce global greenhouse gas emissions to net zero as fast as possible,’ Dr Hörter said.
‘Every purchased EUA through our fund is not available for polluting companies, reducing supply. Higher carbon emissions prices incentivise companies to accelerate decarbonisation efforts and switch to low-carbon solutions.’
This mitigation effect grows over time as a function of the EUA scarcity under the finite EU ETS CO2 emissions budget.
‘Under the strict EU Sustainable Finance Disclosure Regulation (SFDR) our EUA Strategy Fund is classified as an ESG characteristic fund with emphasis on E,’ he said.
Munich Re has a long track record analysing and pricing climate risks. As early as 1973, Munich Re raised awareness in relation to how global warming, changing weather patterns and natural catastrophes affect every market participant.
In late 2019, Munich Re recruited highly respected Australian funds management executive, Alex François, to establish and grow its asset management and retirement income businesses in Australia and New Zealand. Mr François is overseeing the distribution of the MRI EUA fund in our region.
‘Our goal is to deliver financial performance and contribute to climate mitigation through innovative investment solutions for investors,’ Mr François said. ‘We capitalise the vast climate know-how of Munich Re through continuous dialogue with climate, risk, and investment experts. Our investment solutions give outside investors the opportunity to benefit from this expertise.’