A total of 253 European-domiciled funds switched their strategies or investment profiles to include environmental, social responsibility and governance factors in 2020, according to Morningstar. With a further 505 new funds launched in Europe during the year, total ESG assets set a new record of €1.1trn by year-end. Index funds experienced significant growth, accounting for 22.5% of the total market by the end of 2020 after an 84% year-on-year increase in inflows in the fourth quarter.

A survey of large institutional investors by MSCI has found that many see climate change as the biggest challenge for markets and managing risk. A third of institutions with assets exceeding $200bn say climate change is the biggest challenge regarding investments within the next three to five years, according to the survey of around 200 executives at pension funds, sovereign wealth funds, insurers and endowments.

Macquarie Infrastructure and Real Assets has exceeded its funding target by raising €1.6bn for investment in renewable energy projects by the Macquarie Green Investment Group Renewable Energy Fund 2. The fund, which will invest in wind and solar power projects in western Europe, the US, Canada, Mexico, Japan, Taiwan, Australia and New Zealand, received commitments from 32 investors including private and local government pension schemes, insurers and sovereign wealth funds.

Natixis Investment Managers' Paris-based affiliate and smart beta specialist Ossiam has launched the Food for Biodiversity exchange-traded fund, which aims to tackle biodiversity destruction using an active quantitative strategy. It will use data from Iceberg Data Lab to assess the material impact of food companies, their suppliers and customers.

Legal & General Investment Management has launched a green bond exchange-traded fund. The L&G ESG Green Bond UCITS ETF will track the JP Morgan ESG Green Bond Focus Index, which covers green bonds issued in hard currency, credit and local currency government bonds. The fund incorporates green bonds that have been reviewed independently by the Climate Bonds Initiative.

China accounted for 75% of investment by environment, social responsibility and governance-focused funds in emerging markets last year, according to fund data provider EPFR Global, and has attracted 83% so far this year. The volume of investment in China makes Asia the most popular region for ESG investors.

UK asset manager M&G has created a new investment team with a £5bn allocation to invest in sustainable private assets around the world. The Catalyst team, which has received the allocation from M&G’s £136bn with-profits fund, has 25 dedicated staff in London, Singapore, New York and Mumbai. Pipeline investments include microfinance as well as financing for affordable housing and waste-to-energy facilities.

The implementation of the Sustainable Finance Disclosure Regulation requirements on March 10 could lead some asset managers, particularly exchange-traded fund providers, to mislabel their funds and potentially result in greenwashing, analysts warn. They note that asset managers must classify their funds as regular funds under Article 6 of the regulation, light green funds with sustainable characteristics under Article 8, or dark green funds that actively seek to promote climate goals under Article 9, depending on their impact on the environment and emissions, but warn that funds within each category could have very different ESG characteristics, confusing investors. Some groups may label their funds under articles 6 or 8 to avoid complications when they must provide hard data to justify their categorisation decisions from January 1, 2022. Adrian Whelan, global head of regulatory intelligence for investor services at Brown Brothers Harriman, says the result could be multiple sub-sets of Article 9 funds without the ability to compare them adequately under the SFDR classification system.

Luxembourg foreign minister Jean Asselborn and environment minister Carole Dieschbourg have backed a proposal for the grand duchy to criminalise ecocide, following the example of neighbours Belgium and France. The ministers say a clear definition of the term would have to be agreed, along with a thorough review of how other EU members are tackling the issue.

BNP Paribas is to stop financing customers that produce or buy beef or soybeans from Amazon forest land that has been cleared or converted to farming since 2008, and will encourage customers not to produce or buy beef or soybeans from the Cerrado savannah in Brazil cleared after January 1, 2020. The French group will also end lending to producers, meat conditioners and traders that do not demonstrate strategies to achieve zero deforestation in production and supply chains by 2025.

The UK's Investment Association is facing criticism for not having any ethnic board members, while telling listed companies that its proxy adviser Institutional Voting Information Service will issue amber-top warnings to FTSE 350 companies that do not have plans to include at least one ethnic minority member among their directors. The organisation says it plans to appoint at least one ethnic minority board member by 2024.

Diego Lopez, managing director of sovereign wealth and public pension fund data platform Global SWF, says political processes are hampering the environment, social responsibility and governance ambitions of Norway's $1.3bn Government Pension Fund Global. He argues that the Norges Bank Investment Management decision-making process for exposure to asset classes is far more drawn-out than at smaller asset managers because of political considerations.

Japanese steel manufacturer Kobe Steel has launched a new technological process that reduces carbon dioxide emissions from blast furnaces by up to 20% when used in combination with direct reduction iron, which is a common substitute for scrap in electric arc furnaces. The technology, which the company claims can be applied to other sectors at low cost, was trialled for a month at Kobe's main Kakogawa Works site last October, and products could be made available to customers within a year.

The plastic in disposable face masks can be recycled as a construction material for roadbuilding, according to Australian researchers, who say three million masks can be used to build one kilometre of two-lane road when mixed with recycled concrete. The research team from RMIT University determined that a mix of 1% masks and 99% recycled concrete meets the required civil engineering standards for use.