Franklin Templeton has launched the Franklin European Social Leaders Bond fund, which aims to deliver positive social outcomes by promoting social equality.
The new offering is targeting a total return of income and capital growth by investing predominantly in a portfolio of social bonds, largely made up of Euro-denominated investment grade bonds worldwide.
It will support positive social outcomes in that proceeds will exclusively be applied to finance eligible social projects directly mitigating a social issue for a target population.
This may include those living below the poverty line, people with disabilities, displaced persons, among others, and targets a wide range of social projects like affordable housing, employment generation, food security, socioeconomic advancement and access to essential services.
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Investments will mainly be involved in socially sustainable activities, including those linked to the United Nations Sustainable Development Goals (SDGs), including 'Np Poverty', 'Zero Hunger', 'Clean Water' and 'Sanitation', 'Decent Work' and 'Economic Growth'.
It will be run by David Zahn, senior vice president and head of European fixed income for Franklin Templeton fixed income both global sovereign and EMD and Roderick MacPhee, vice president, manager and research analyst for Franklin Templeton fixed income.
They said the biggest source of alpha will come from active security selection, duration management and sector allocation.
Zahn added the pair were "delighted" with the new fund and coupled with the fact that Europe was "the largest and most advanced social bond market globally and continues to experience rapid growth" he said this strategy will give investors access to a wide range of attractive social bonds and the opportunity to support investments geared towards creating societal benefits.
The managers will be supported by the wider fixed income investment team, including a dedicated ESG team of six investment analysts based in Europe.
Franklin European Social Leaders Bond is a sub-fund of the group's Luxembourg-domiciled Franklin Templeton investment funds range and will be registered in almost 20 European countries including the UK.
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"Given recent events and the growing emphasis on environmental aspects of sustainable investing, investors are increasingly interested in addressing the S in ESG," said Zahn.
"Launching this new fund now is a timely opportunity to bring a distinct strategy to the market and broaden our product offerings catering to societal wellbeing. In addition, a portfolio of actively managed social bonds can provide an attractive source of risk-adjusted returns while providing liquidity to new and existing projects contributing to positive social outcomes.
"This fund also benefits from transparency in quantifiable reporting on social impact of fixed income investments."
Jaspal Sagger, head of global product strategy at Franklin Templeton, said that the team recognised the range of client motivations regarding sustainable investing and that Franklin Templeton would "continue to build out solutions to meet these differing needs.
"The launch of this new social bond fund provides a solution for investors seeking positive social outcomes with real impact on individual lives."
