Climate Change High Yield Credit

Reasons to invest

Benefitting the planet

The strategy’s dual objective looks to deliver strong financial performance and a positive environmental impact through decarbonisations.

High conviction, flexible approach

We target companies with strong fundamentals – investing across geographies, instrument types and credit curves.

Climate change measurement

Our proprietary internal scoring framework conveys a company’s progress towards the low-carbon transition.

Pushing for climate impact

Engagement encourages companies to pursue decarbonisation commitments, with the potential for material, positive impact.

Investment expertise

The principal members of the investment team have worked together since 2004 to deliver attractive high-yield credit returns.

Quick links

Overview

Through high-conviction investment in companies with both strong fundamentals and the potential to transition to a low-carbon world, we target financial outperformance and a positive impact.

Fraser Lundie, CFA

Head of Fixed Income - Public Markets

Why Climate Change High Yield Credit?

Attractive opportunities in high yield

Benefitting the planet

Exclusions

Fast reading

While the transportation and industrials sectors get the most attention when it comes to cutting carbon emissions, buildings and the built environment offer the greatest and most cost-effective reduction opportunities.
Progress has been encouraging, with building codes and technological innovation helping to lead the way towards a lower carbon footprint – but more needs to be done.
Plus case studies and an update on exposures by impact theme.

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How we invest

High-conviction process

We overlay our dynamic investment process with a proprietary process that determines the climate change credentials of companies for portfolio construction and position-sizing purposes. Our high-conviction and flexible approach targets companies with strong fundamentals to generate returns across geographies, instrument types and credit curves. Through our disciplined, bottom-up research, we aim to identify issuers with attractive investment profiles that are contributing to the decarbonisation of the wider economy.

Climate change measurement

To determine a company’s progress towards decarbonisation and the materiality of its impact, we begin by analysing an aggregate of historical climate change data and scores. We then supplement the forward-looking perspectives of our credit analysts and engagers, including engagement insights. This enables us to really assess each company’s climate-related risks and its progress towards decarbonisation and potential impact. Designed by the Sustainable Fixed Income team, our bespoke framework – the Climate Change Impact (CCI) Score – conveys a company’s willingness to decarbonise, the potential to reduce its carbon footprint and the materiality of that decarbonisation path. These scores are key to issuer selection and sizing within the strategy.

Active engagement to bring about change

We engage with companies to bring about a positive impact that supports the transition to a low-carbon future. Our dedicated engagers in the Fixed Income team, supported by EOS at Federated Hermes, a leading global stewardship team, seek positive action on climate change. We will not hold a company’s credit where engagement on climate change transition has failed.

Investment philosophy

Our twin objectives are to deliver:

Strong financial performance
Positive climate impact through decarbonisation

We believe these aims are interwoven and self-reinforcing.

Investment process

Taking a global universe and turning it into a high conviction portfolio

Screening

Company and security selection

Climate Change High Yield Credit-investment process-infographic

We begin with positive and negative screens. The negative screen excludes fossil fuels, tobacco, controversial weapons and companies in contravention of the principles of the UN Global Compact, as well as companies with a Climate Change Impact (CCI) score of 5. CCI scores measure a company’s decarbonisation in terms of progress and impact (the latter referring to the contribution the company makes to decarbonising the economy through its operations and products).

The positive screen selects innovators; companies with science-based targets; genuine transition stories encouraged by engagement and green bonds.

We assess the company fundamentals, scoring their operating, financial and ESG strengths based on analyst and engagement insight. Concurrently, our Sustainable Fixed Income team analyses the materiality of the company’s climate change agenda and assigns our CCI score.

Once we have established the company’s fundamentals and climate change agenda, we will identify which instrument within the capital structure it is best for us to use. Our analysts will produce a score for value.

Team

6016, 6098

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Product information

For the latest performance and vital information – including prices, factsheets, key facts, identifiers and ratings

Solutions across the spectrum

EOS Stewardship

Climate Change
High Yield Credit

Seeking to deliver a positive climate impact alongside long-term outperformance.