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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.

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Aviva Investors Climate Transition Global Credit: Strategy in brief

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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

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