Aviva Investors has raised an initial £425m (€493m) for a newly launched climate transition real assets fund to target direct real estate, infrastructure and forestry assets investment opportunities in Europe.

The global asset manager said the initial seed capital, with up to 50% leverage, will give the Climate Transition Real Assets Fund around £1bn of investment capital to deploy.

Aviva Investors said the fund will aim to provide various investor groups, including defined contribution schemes, with access to climate-focused solutions across the breadth of the European real assets universe – principally direct real estate, infrastructure and forestry assets.

The fund will aim to deliver a net annual return of approximately 8% per annum over rolling five-year periods, whilst targeting net zero by 2040 or sooner, the manager said.

Aviva Investors said it currently has a pipeline of investment opportunities, as well as a substantial level of investor capital, which the team expects to significantly deploy over the coming 12 to 18 months.

The Climate Transition Real Assets Fund is one of the first of its kind in the industry to offer investors direct investment in nature-based solutions alongside real estate and infrastructure.

Daniel McHugh, CIO, real assets, at Aviva Investors, said: “One of our key objectives as a business is to ensure we are delivering the investment products and outcomes that our clients demand. As a committed investor, acting and supporting the transition to a low-carbon and climate-resilient world is not only consistent with our values, it is absolutely in line with what our clients now expect.

“There is a huge opportunity to drive our physical built environment toward net zero through real assets, where significant investment capital and firepower can make a direct and very material impact through increasing renewable energy, reducing emissions from the overall sector and removing carbon through nature-based solutions.”

Mark Meiklejon, head of real asset investment specialists at Aviva Investors, said: “While this fund will be available for multiple client channels, with DC pension funds constituting an increasing proportion of retirement savings, we believe this launch represents a compelling and very differentiated product from others available in the market today.

“It offers opportunities for attractive long-term absolute performance while also tackling climate change, one of the largest systemic risks facing our world today. As we deploy the initial capital, we anticipate strong future third-party interest from investors seeking to align their portfolios with the transition to a low-carbon economy, without sacrificing returns.”

Pierre Biscay, head of customer investments at Aviva, said: “As a significant early investor in the fund, we are delighted to be participating in this exciting product launch.

“We see this as another step towards our commitment to become a net zero company by 2040 and look forward to seeing the strong impact we expect this fund will have both towards a sustainable world and in enhancing customer returns.“

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