Aviva Investors has launched the Aviva Investors Climate Transition Global Credit fund with a $350m strategic capital allocation from the Aviva Investors UK multi-asset range and the Aviva Ireland multi-asset portfolio.
The fund will be co-managed by portfolio managers Tom Chinery and Justine Vroman and climate specialist Rick Stathers. Chinery and Vroman have over 10 and nine years of experience in asset management respectively, while Stathers has studied and worked in climate change for over 25 years.
The fund aims to identify and invest in companies offering goods and services for climate change mitigation and those best-placed to transition to a warmer, lower-carbon world.
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."
Aligned with the UN's Sustainable Development Goals (SDGs), and the firm's wider ESG approach, the fund is designed to enable credit investors to participate in positive climate outcomes.
It complements the Aviva Investors Climate Transition Global Equity fund and the Aviva Investors Climate Transition European Equity fund.
The fund's investment approach excludes fossil fuel companies and targets solutions providers that generate current or future material revenue by addressing climate-related themes, such as the shift to renewable energy sources, sustainable transport and more environmentally conscious lending.
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.
"As investors, it is our responsibility to look beyond small pockets of green finance to engage and mobilise the liquidity of the wider credit market to assist in climate transition and the achievement of net zero carbon emissions.
"Companies that don't adjust their business models will be less attractive to investors and will present a less compelling investment case over time. Climate laggards may find that their financing becomes more expensive than that available to climate leaders."
The fund will be benchmarked against the Bloomberg Barclays Global Aggregate Corporates Index, and invest predominantly in investment grade companies, with a small allocation of up to 5% in high yield bonds.
The vehicle will invest in cash bonds and have a long/short CDS basket to target opportunities arising from the market inefficiencies around climate change.
Last month, Aviva announced its plan to become a net zero carbon emissions company by 2040.
Sustainable Investment Festival, 22-25 June
Investment Week's parent company Incisive Media will host its inaugural Sustainable Investment Festival this summer, featuring keynote speakers, innovative breakout events and sessions to help investors navigate this rapidly-evolving area of the market. Click here for more information.