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.
Active engagement
We actively engage across all sectors with the aim of positively influencing climate-related behaviour and helping to create competitive returns. For instance, we advocate for companies to commit to science-based targets 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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The time to lead: Reforming multilateral development banks through a climate lens
28 Nov 2023
To have a chance of limiting global warming to less than two degrees, the world must unlock huge investments in emerging markets. This is prompting calls for the reform of multilateral development banks, but will this be enough?
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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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The levers of change: A systems approach to reconcile finance with planetary boundaries
13 Sep 2022
Financial services underpin all economic activity, which itself depends on Earth’s natural capital. Resolving their interconnected issues to bring about a just transition will require a holistic, systems-thinking approach.
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A tragedy of perception: Fixing the ESG blind spots in business, finance and economics
8 Sep 2022
A distorted sense of reality has caused us to disregard sustainability concerns when modelling economies, companies and finance. We can no longer ignore such material issues just because they are too hard to fathom. This is where systems thinking comes in, explains Steve Waygood.
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Redefining stewardship: Why stakeholder capitalism needs to wake up
31 Aug 2022
Asset managers and other financial institutions have a duty to act in the best interests of their customers and society. Macro stewardship will be crucial to meeting these responsibilities, argues Mark Versey.
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Know your limits: An interview with Nafeez Ahmed
29 Aug 2022
Warnings that natural systems are close to breaking point are not new – but how will we respond? Combining what we know with existing technologies could offer a remarkable opportunity to rethink our world, as Nafeez Ahmed explains.
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The burning issue: Avoiding ESG fatigue
25 Aug 2022
How can we face existential problems and stay positive? Abigail Herron contemplates simple steps to protect momentum and avoid burnout.
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Strategies to change the financial system: An interview with Natalie Mangondo
16 Aug 2022
Can society reform the system that has enabled growth but simultaneously brought the long-term health of the planet into question? UN Climate Change High Level Champions Finance Youth Fellow Natalie Mangondo contemplates choices and change with AIQ.
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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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Energy in focus: Part 2: The pivot to green
28 Mar 2022
How will the surge in the prices of oil, gas and coal impact the transition to low or zero carbon sources of fuel? In the second part of our Q&A on the energy sector, experts from our credit, equities and ESG teams contemplate the challenges and opportunities in the pivot to green.
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Energy in focus: Part 1: The last hurrah for fossil fuels?
24 Mar 2022
The fallout from the conflict between Russia and Ukraine has highlighted the fragility of energy markets, with significant implications for the global economy.
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What does the data say? ESG in focus
25 Feb 2022
In this month’s instalment of our visual series on topical data themes, we look at some of the major ESG trends and metrics of the last few years.
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