TOKYO (Reuters) - Sumitomo Mitsui Financial Group will invest up to $25 million in British asset manager Affirmative Investment Management (AIM), two sources said, becoming the first Japanese lender to partner with a specialist in ESG bond investments.
The capital tie-up comes as Japanese banks are turning to asset-based fees to generate revenue amid ultra-law interest rates, and as global investors have warmed to the rapidly expanding market for environmental, social and governance bonds.
SMFG, Japan’s second-largest lender by assets, will invest $20 million in the London-based company this year and up to another $5 million over the next few years depending on AIM’s performance, said the sources, who declined to be identified because the information has not been made public.
SMFG will eventually own 24.9% of AIM’s total shares outstanding, or a 4.9% stake in terms of voting rights, they said, adding that the two companies would announce the deal this week.
An SMFG spokesman declined to comment. AIM could not be immediately reached for comment.
With $650 million in assets under management as of end-2019, AIM specialises in managing fixed-income portfolios that generate a positive environmental and social impact, according to its website.
Annual issuance of ESG bonds has reached about $273.8 billion in 2019, up from $15.1 billion in 2013, according to data compiled by BNP Paribas.
In an aim to bolster its asset management business, SMFG last year bought British asset manager TT International, which has strengths in emerging-market equities. SMFG also agreed earlier this year to invest in alternative investment specialist Ares Management Corporation.
Japanese lenders have been expanding into overseas asset management. Mitsubishi UFJ Trust and Banking bought Commonwealth Bank of Australia’s asset management unit for about 300 billion yen ($2.8 billion) last year.
Reporting by Takashi Umekawa and Takaya Yamaguchi; Editing by Chris Gallagher and Kim Coghill