Swiss Re Insurance-Linked Fund Management

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Variant Impact Fund targets SDG investments, including cat bonds


Another new mutual investment fund is launching with a focus on investing in opportunities and asset classes that support the United Nations (UN) Sustainable Development Goals (SDG’s), with catastrophe bonds singled out as one suitable category to allocate to.

sustainable-investment-cat-bonds-ils-esgThe Variant Impact Fund is launching as a mutual fund with an interval structure and one of the non-principal asset classes it will be able to allocate some of its funds to is Reinsurance-Related Securities.

Within this rather broad bucket sits the catastrophe bond, as well as other event-linked securities, mortality bonds, plus other non-natural peril insurance-linked securities (ILS).

The goal is to deliver returns to investors by allocating to opportunities and assets that can make an impact according to the UN Sustainable Development Goals (SDGs).

The Variant Impact Fund will, “Seek to generate positive social and environmental impact by targeting investment opportunities that are both aligned with the United Nations Sustainable Development Goals (“UN SDGs”) and consistent with the Fund’s impact investing framework.”

This fund is not trying to call itself an ESG (environmental, social and governance) appropriate strategy, instead the manager prefers to explain that ESG can be a risk, due to the lack of standard definitions or practices, data sources and industry agreement.

Which differs to another mutual fund we mentioned recently, the BlackRock ESG strategy that also aims to allocate some of its assets to the catastrophe bond market and has a roughly $2.3 billion first-close target for the ESG fund.

Variant Investments is behind this new Impact Fund and is a manager with a mutual and interval fund track-record.

By focusing on asset classes that fit under the UN SDG’s, Variant Investments is differentiating itself within what is often called the ESG investments space, perhaps making it simpler for investors to understand as well.

Catastrophe bonds, other ILS and reinsurance more broadly, have long been said to fit under the UN’s SDG classification, meeting a number of the SDG’s due to the fact they provide disaster risk financing capacity and help communities to recover from disaster events.

More specifically, one major pension investor in the ILS market said a few years ago that it classifies ILS as a Sustainable Development Investment in relation to Sustainable Development Goal 13, which is related to Climate Change, given ILS assists in strengthening of resilience and providing much-needed adaptive capacity to climate-related hazards and natural disasters.

As a non-principal investment, it seems unlikely that catastrophe bonds, or reinsurance securities, would ever make up a large proportion of the Variant Impact Fund.

But as increasing numbers of investors clamour for ESG or sustainable investments, the fact cat bonds and ILS can fit under certain criteria, such as the SDG’s, is set to drive increasing interest in the asset class and as a result could drive more capital into the space.

ESG investing and the opportunities it presents are a growing focus for the insurance-linked securities (ILS) market. Read more of our insights on this topic here.

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