Aviva Investors has launched a climate transition bond fund in a further sign of how asset managers are extending ESG investing into fixed income.
The Aviva Investors Climate Transition Global Credit Fund will invest in companies offering goods and services for climate change mitigation and is launched with a $350 million (€290.7 million) allocation from Aviva Investors multi-asset strategies.
Tom Chinery, Justine Vroman and Rick Stathers manage the fund and will exclude fossil fuel companies and target industries including renewable energy, sustainable transport and “environmentally-conscious lending”.
Significantly, says Aviva Investors, 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”.
Bloomberg Barclays Global Aggregate Corporates Index is used as the benchmark, meaning investments are predominantly in investment grade companies, but with a small allocation of up to 5% in high yield bonds.
Colin Purdie, chief investment officer for credit at Aviva Investors, said: “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.”
An issue for ESG bond funds is how to effect change, given corporate bond investors lack shareholder clout, but Purdie said that “climate laggards may find that their financing becomes more expensive than that available to climate leaders” over time.
As ESG development in bond investing starts to gather pace, BlueBay earlier this week launched a corporate bond impact fund.
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