Canadian Core Plus Climate Transition– Canadian fixed income - Aviva Investors

Investing in the climate transition

The scale and urgency of change needed to ensure global greenhouse gas emissions are aligned with a 1.5 degrees Celsius pathway will impact every part of the global economy.

Our Core Plus Climate Transition Fund invests in debt securities of companies driving fundamental changes toward a sustainable future. We invest with a dual objective, which we believe are equally important and positively aligned to deliver:

Long-term capital growth

To support the transition to a lower carbon world

Investment opportunities in the strategy are linked to the following investment themes and aligned with the principles of the following United Nations Sustainable Development Goals:

Affordable and clean energy

Climate action

Our approach

We look beyond company emissions to identify the winners from the transition across a broad range of sectors. First, we exclude more carbon-intensive fossil fuel companies. We then invest in debt securities of companies either mitigating or adapting to climate change or are transition- oriented, while leveraging our scale and influence to engage with portfolio companies. This approach can lead to the following investor benefits: profitable growth, resilience across market cycles and influencing positive outcomes.

Portfolio construction

In addition to the more traditional forms of alpha, in fixed income, we harness portfolio construction as a separate and unique alpha source. The benefit of this is an ability to accept and work with meaningful investment constraints while broadly preserving the risk/reward relative to unconstrained strategies. This alpha source also allows us to create a portfolio that better balances returns across various market outcomes in a manner that does not involve substantial tradeoffs. The leveraging of this alpha source is especially useful alongside our proprietary climate model that covers a broad range of industries and seeks to reduce decarbonization and physical climate risks embedded in value chains. This approach provides us with greater certainty while concurrently delivering on both investment and climate objectives.

Back transition

The journey to net zero presents risks and opportunities across all sectors. Our focus on solutions and transition themes allows us to identify companies whose services and products deliver tangible climate outcomes. It also helps maximise the strategy’s opportunity set and potential to deliver consistent, long-term outperformance.

Leaders in stewardship and engagement

Portfolio holdings are targeted with two timebound engagement asks: Science-based targets and CDP disclosures. We also actively engage with governments, policymakers, NGOs, academics and other key influencers to correct material market failures.

Key risks

Fixed income investments have a reputation for safety but are not without risks. The risks below are illustrative. Other risks also exist. For further information, please contact our investment team.

Investment risk

The value of an investment and any income from it can go down as well as up and can fluctuate in response to market moves. Investors may not get back the original amount invested.

Credit and interest rate risk

Bond values are affected by changes in interest rates and the bond issuer’s creditworthiness. Bonds that offer the potential for a higher income typically have a greater risk of default.

Derivatives risk

Investments can be made in derivatives for hedging purposes only, which can be complex and highly volatile. Derivatives may not perform as expected, meaning significant losses may be incurred.

Liquid securities risk

Some investments could be hard to value or to sell at a desired time, or at a price considered to be fair (especially in large quantities). As a result their prices can be volatile.

Sustainability risk

The level of sustainability risk may fluctuate depending on which investment opportunities the Investment Manager identifies. This means that the fund is exposed to Sustainability Risk which may impact the value of investments over the long term.

Core Plus Climate Transition team

Aviva Investors Climate Change Views

Disclaimer: These views are authored by various individuals within Aviva Investors.

Decarbonising buildings: Five barriers and how to overcome them

28 Jan. 2025

The built environment generates almost two-fifths of global emissions, but decarbonising the sector will require a coordinated effort. We brought together experts across the value chain to discuss shared challenges and solutions.
Decarbonising transport: Five key challenges and how to overcome them

26 Nov. 2024

Creating sustainable transport solutions is vital to meet net-zero pledges, but progress has been patchy. To encourage mobilisation across value chains, we brought together a range of sector experts to identify key blockers and potential solutions.
Building bridges to net zero: Mobilising value chains for decarbonisation

25 Nov. 2024

From aviation to heavy industry, achieving net zero requires a collective unlocking of entire ecosystems. This is what our sector roundtables aim to do, by bringing together stakeholders from across the value chain of high-impact sectors.
Our annual letter to company chairpersons

24 Jan. 2022

As a key part of our engagement efforts, every January we send a letter to the chairs of companies we invest in (and some we don’t, but still want to use our influence with) to set out our stewardship priorities for the year. Here, in full, is our 2022 letter.