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. As such, climate change arguably represents the largest long-term systemic risk in credit portfolios.
Our Climate Transition Global Credit Fund invests in bonds of companies which are deemed to be responding to climate change effectively in the transition to a low-carbon economy. The fund may be suitable for investors seeking similar levels of capital growth to a typical investment-grade bond portfolio. It may also appeal to those interested in supporting companies that are deemed to play a key role in tackling climate change by providing solutions or by orientating their business models to be resilient in a warmer climate. As such the fund has a dual ambition for:
Long-term capital growth
Investing in bonds of companies responding to climate change effectively
Our approach
We seek to identify the potential winners from the transition across a broad range of sectors. First, we apply our firm-wide baseline exclusions policy and specific fund-level exclusions for fossil fuels. We then invest in debt securities of companies either mitigating or adapting to climate change, or companies orientating their businesses to be resilient in a low-carbon economy. Furthermore, we leverage our scale and influence and engage with portfolio companies to accelerate progress. We believe this approach can lead to the following investor benefits: profitable growth and resilience across market cycles while seeking to support the climate transition.
Back transition
We seek to identify solutions and transition-orientated companies whose services and products are supporting or resilient in the climate transition. This can help maximise the strategy’s potential to deliver consistent, long-term outperformance as part of a core investment grade allocation.
Optimised portfolio construction
Simply allocating risk based on traditional industry sectors is not efficient. We instead use custom sectors to compare bonds based on volatility and correlation to help incorporate our best bottom-up idiosyncratic ideas.
Transition Focus
Our proprietary transition risk framework helps us assess climate risks across all sectors with an additional criteria being a preference for companies committing to science-based targets as a way to incentivise emissions reduction through their value chains.
Climate investment strategy
Aviva Investors Climate Transition Global Credit Fund
A credit strategy seeking to outperform the benchmark over the long-term (5 years or more) by investing in bond of companies responding effectively to climate change.
Evidencing how we are progressing against our sustainable outcomes objective
This report looks at the progress the fund has made in 2022, in delivering tangible sustainable outcomes for clients, across the companies invested in as well as through company engagement and macro stewardship.
Aviva Investors Climate Transition Global Credit: Strategy in brief
The strategy has limited exposure to carbon-intense fossil fuels and invests in debt securities of a broad range of companies across sectors that are best positioned to benefit from the transition to a low-carbon world.
Key risks
Full information on risks applicable to the Fund are in the Prospectus and the Key Investor Information Document (KIID).
Investment risk and currency risk
The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency and exchange rates. 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.
Illiquid 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), and as a result their prices can be volatile.
Counterparty risk
The Fund could lose money if an entity with which it does business becomes unwilling or is unable to meet its obligations to the Fund.
Derivatives risk
Derivatives are instruments that can be complex and highly volatile, have some degree of unpredictability (especially in unusual market conditions), and can create losses significantly greater than the cost of the derivative itself.
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.
Climate Transition Global Credit team
Justine Vroman
Senior Portfolio Manager
Thomas Chinery
Senior Portfolio Manager
Climate change views
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The tipping point for climate finance: Making financial flows consistent with the Paris Agreement
29 Nov 2023
Transition plans, including from governments in response to the Global Stocktake, will be crucial to bring about the shift to a low-emissions, climate-resilient world. Markets need clear implementation signals to align capital with the goals of the Paris Agreement. Our in-depth report calls for the creation of a transition-plan ecosystem connecting all levels of the global economy.
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Deals delayed and crowded trades…But investors can still find value in infrastructure debt
4 Sep 2023
Private infrastructure debt still offers a broad spectrum of opportunities, but investors face complex challenges. In this Q&A, our infrastructure debt team contemplate the current state of the market and where it goes from here.
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Tipping points and transformation: Getting on the right side of change
16 Aug 2023
Rapid changes in the global economy could tip some sectors into low-carbon phases faster than incumbents expect, with important investment implications.
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Charging up: Batteries and the fight against climate change
5 Jan 2023
Batteries are set to play a crucial role in helping to decarbonise the global transport and energy sectors. As capital floods into an industry experiencing exponential growth, we look at the key considerations for investors.
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Confronting a permacrisis? The intersection between antimicrobial resistance, climate change and biodiversity loss
23 Nov 2022
Will a warmer and less biodiverse world give pathogens new opportunities, and do we have the tools to confront disease? This report discusses the complex intersection of three planetary crises and calls for urgent action to slow resistance to antimicrobial drugs – an obvious public health emergency.
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Deep water: Ten threats to marine ecosystems
8 Jun 2022
Our air, weather, food, the health of diverse marine life and millions of jobs all depend on the ocean. But we have not done well as custodians of marine ecosystems. Here, we set out ten ways where human actions threaten the health of an essential environment.
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