Climate Change
High Yield Credit

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

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.

Overview

Overview

Fraser Lundie

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?

The strategy aims to outperform the global high-yield market through high-conviction investment in companies with strong fundamentals that also demonstrate the potential to decarbonise and transition to a low-carbon world.

Order with a leaf

We seek companies that have the willingness and ability to make a positive impact on the planet. Investors can gain exposure to the high-yield market and support the transition to a low-carbon economy.

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We exclude companies involved in activities that we believe to be unsustainable or unethical. Although not exhaustive, our exclusions list includes companies involved in fossil fuels, tobacco, controversial weapons and those in contravention of the principles of the UN Global Compact.

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How we invest

High-conviction process
Climate change measurement
Active engagement to bring about change

Investment philosophy

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

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

6120, 6203
Fraser Lundie

Fraser Lundie, CFA

Head of Fixed Income – Public Markets, Federated Hermes Limited

Nachu Chockalingam

Nachu Chockalingam, CFA

Senior Credit Portfolio Manager, Federated Hermes Limited

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Product information

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

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Insights

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Our Purpose

To deliver Sustainable Wealth Creation

Like all our investment capabilities, Federated Hermes Climate Change High Yield Credit aims to deliver Sustainable Wealth Creation: the generation of wealth through investments that enrich investors, society and the environment over the long term.

Our business provides three equally powerful pathways to achieving this aim. Climate Change High Yield features in the Impact route.

Active ESG on blue background

Responsible, active investing for long-term performance.

Sustainable on green background

Thematic and values-based approaches for sustainable outcomes.

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Mission-led investment strategies to create positive impact.

Federated Hermes
Climate Change High Yield Credit