Sustainable investment firm responsAbility and asset manager ESG Asset Management (ESG-AM) announced the launch of the Transition to Net Zero Bond Fund. The fund focuses on companies that are taking measures to achieve CO2 emissions reductions and net zero greenhouse gas (GHG) emissions in the long term.
According to responsAbility about 70% of the bonds in the initial portfolio are allocated across the industrial sectors, which have the greatest leverage in cutting GHG emissions, 25% into the financial services sector, and about 5% to the utility sector. In terms of country allocation, the US, UK, Germany and France make up the majority of the portfolio with 40%, 13%, 9% and 8%, respectively.
Philipp Good, CEO of ESG-AM, said:
“Our portfolio focuses on issuers through all rating categories, with an initial average rating of BBB, that stand out for having defined specific climate targets and consistently pursuing them. From the investable universe of around 750 issuers, we select those 100 bonds that also stand out for their attractive risk-return profile with a target yield currently in USD of over 5.5%.”
As an example of the fund’s strategy, the investment firms highlighted its holdings in building materials company Holcim. Building materials companies are coming increasingly in focus on the fight against climate change, due to the carbon intensity of their primary products. Holcim is developing new types of cements, increasing the use of waste-based fuels, and operating pilot plants where unavoidable carbon emissions are captured.
The Transition to Net Zero Bond Fund is classified as an Article 9 fund according to EU SFDR, and initial seed funding for its launch has been provided by institutional investors from Germany and Switzerland.
Stephanie Bilo, Chief Client & Investment Solutions Officer at responsAbility, said:
“The urgency of decarbonization requires investors to take credible action. However, the current most widespread approach of corporate exclusions falls short. Excluding carbon-intensive sectors from impact investment may seem obvious, but it does not achieve the goal. On the contrary, it is important to include companies from such sectors. Thanks to the influence of investors, targeted incentives for measures can be set so that companies with large greenhouse gas emissions in particular take effective measures to reduce greenhouse gases.”