The fund aims to identify and invest in companies offering goods and services for climate change mitigation and those best-placed to transition to a warmer, lower-carbon world.
Aviva Investors, the global asset management business of Aviva Plc, has launched the Aviva Investors Climate Transition Global Credit Fund with a USD350 million strategic capital allocation from the Aviva Investors UK multi-asset range and the Aviva Ireland multi-asset portfolio.
The fund aims to identify and invest in companies offering goods and services for climate change mitigation and those best-placed to transition to a warmer, lower-carbon world.
Aligned with the United Nation’s Sustainable Development Goals (SDGs), and the firm’s wider ESG approach, the fund is designed to enable credit investors to participate in positive climate outcomes. It complements the Aviva Investors Climate Transition Global Equity Fund and the Aviva Investors Climate Transition European Equity Fund.
The fund will be co-managed by portfolio managers Tom Chinery and Justine Vroman and climate specialist Rick Stathers, who have over 10 and nine years of experience in asset management respectively and Stathers has studied and worked in climate change for over 25 years. They will benefit from the research and analysis of Aviva Investors’ 125-strong global credit team and over 25 ESG analysts.
The fund’s investment approach excludes fossil fuel companies and targets solutions providers that generate current or future material revenue by addressing climate-related themes, such as the shift to renewable energy sources, sustainable transport and more environmentally-conscious lending.
Significantly, the approach also aims to capture transition-oriented companies with low decarbonisation and physical impact risk, extending the investment universe beyond businesses with obvious green credentials. The fund will be benchmarked against the Bloomberg Barclays Global Aggregate Corporates Index, and invest predominantly in investment grade companies, with a small allocation of up to 5% in high yield bonds. Importantly, the fund will invest in cash bonds and have a long/short CDS basket to target opportunities arising from the market inefficiencies around climate change.
Colin Purdie, Chief Investment Officer for Credit at Aviva Investors, says:“We can’t pivot to a lower carbon world if all we do is rule out the poor performers and only invest in companies that provide solutions to climate change. All companies need to adjust for a warmer, lower carbon world, which is why we felt it was important to use a wider transition lens to capture a larger set of businesses beyond those with obvious green credentials.
“As investors, it is our responsibility to look beyond small pockets of green finance to engage and mobilise the liquidity of the wider credit market to assist in climate transition and the achievement of net zero carbon emissions.
Companies that don’t adjust their business models will be less attractive to investors and will present a less compelling investment case over time. Climate laggards may find that their financing becomes more expensive than that available to climate leaders.”
Aviva Investors is committed to embedding sustainable investing across its business. The Principles For Responsible Investment (PRI) assigned the firm an A rating for fixed income in latest UN PRI assessment; the firm recently introduced a 1.5 degree centigrade aligned engagement programme focused on 30 of the world’s worst carbon emitters; its collective activities include partnerships and lobbying through Climate Action 100, the Task Force on Climate Related Disclosures (TCFD), the Carbon Disclosure Project (CDP) and the Net Zero Asset Managers Alliance.
Aviva PLC announced last month its plan to become a net zero carbon emissions company by 2040, the most demanding target of any major insurance company in the world, as part of its plan to become the UK’s leading insurer, contributing to a sustainable economic recovery. Aviva was the first international insurer to go operationally carbon neutral in 2006 and achieved its 2030 carbon reduction target (70 per cent reduction on 2010 levels) 10 years ahead of schedule.
