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Original Risk: A Society for Change Agents

Entropics targets raising new institutional ILS fund with sustainability focus


Entropics Asset Management AB, the Swedish manager of a catastrophe bond fund, is planning to raise a new institutional investment fund strategy focused on resilience and sustainable opportunities in insurance and reinsurance.

entropics-asset-management-logoEntropics was one of the first managers of an insurance-linked securities (ILS) fund to embrace sustainable development goals and responsible investment.

The manager has been following a responsible investment strategy for some time now, taking a stand on cat bond investments that are sustainable and responsible.

It achieved this by stating that it would not invest in catastrophe bonds covering fossil energy production, or gambling, as well as becoming a member of the Swedish Sustainable Investment Forum (Swesif).

But now, Entropics wants to take it a step further and raise an institutional investment fund focused on climate risk resilience opportunities from the insurance and reinsurance sector.

Working with the Stockholm Resilience Centre, Entropics has formed and will maintain a joint Sustainability Committee, aiming to promote increased resilience in all insurance, reinsurance and ILS products that protect against natural disasters, leveraging current research and insights to develop solutions.

Robert Lindblom, CEO of the investment manager explained, “In order to recruit large institutions to participate we have developed a new institutional fund.

“It will be a Swedish based fund with a focus on protecting against natural disasters and contributing to a more resilient insurance sector.

“We are continuing to develop our strategy to offer investment management services that addresses the climate challenge and contributes to increased sustainability.”

The manager continued, explaining, “The new institutional fund will focus on resilient insurance covering natural disasters and will invest according to how the forthcoming EU taxonomy defines economically sustainable activities.
“Instruments for the transfer of climate risks to the capital market are explicitly included in the technical annex to the technical expert group’s final report on the taxonomy and this means Swedish institutional investors can classify the new fund as a sustainable investment from a climate point of view.

“The fund will also continue the work Entropics has done to invest only in bonds that contribute to the achievement of global goals through an in-depth analysis of the entire value chain.

“The intention is that the fund will provide a return in line with the cat bond market and other similar funds lacking a sustainability focus.”

The new Entropics institutional insurance, reinsurance and ILS fund will not be a UCITS, rather it will be developed using a regulatory framework for funds aimed at institutional investors, so that important ILS issue periods can be matched with how often the fund is open for subscription and redemption, the manager further explained.

It’s good to see this continued focus on sustainable investing and resilience from Entropics and given where returns in ILS and reinsurance sit right now, this new fund strategy should make for an attractive proposition for institutional investors.

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