M&G Investments has launched a private debt fund to invest in projects with a positive social or environmental impact, including social housing and green real estate.
The M&G Impact Financing Fund has already raised £44.5 million, with seed investment from M&G Prudential, Big Society Capital and the Swedish Foundation for Strategic Environmental Research.
The open-ended fund will invest in private and illiquid debt deals to finance a range of projects focusing on social and environmental concerns, while providing investors with a regular income and total return in excess of that of public bonds.
Among already completed deals, the fund has provided backing to a regeneration of the Greenwich Peninsula in London and supported solar power provision in the US. M&G said these deals will help build houses, provide employment and reduce CO2 emissions.
M&G is working with Sustainalytics, an independent provider of sustainability to help determine which opportunities meet the fund’s impact investing criteria. It said the focus of the fund’s investors is primarily around its environmental and social goals, rather than on specifically investing in debt instruments.
The fund is hoping to gain interest from charities and pension funds that require returns but want to ensure their money is used in ways that will have a positive social and environmental impact. The fund expects to have an investment grade credit rating and deliver more than similarly rated corporate bonds, with current estimates of approximately Libor plus 3 percent per annum net of fees.
The fund will invest in opportunities across the developed world and has already invested in the UK, US and Australia. It expects to be predominantly focused on opportunities in Western Europe but will take advantage of global opportunities.