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Credit investors: delivering into the imperatives of Paris

In this video Anna Karim, Investment Director Fixed Income, and Mitch Reznick, Head of Research and Sustainable Fixed Income, discuss how to decarbonise portfolios within fixed income and the imperative of aligning investment strategies with the Paris Agreement.

We are all aware of the changes global warming have already brought about. From the recent Intergovernmental Panel on Climate Change (IPCC) report ‘Global Warming of 1.5 ºC’, we know that human-induced global warming has already caused increases in both land and ocean temperatures, as well as more frequent heatwaves in most land regions. There is overwhelming scientific evidence that climate change is rapidly accelerating. We have already experienced around 1.0⁰C of average warming above preindustrial levels and continued increases will have an irreversible and catastrophic impact on the environment and our way of life.

The political landscape is also changing rapidly in some regions in favour of a decarbonisation pathway. On 7 October, the EU Parliament voted in favour of a 60% reduction in greenhouse gas emissions by 2030; this implies a major step up compared to the current 40% reduction target and would leap-frog the EU towards its 2050 “net zero” ambition. The vote follows the recent EC proposal to lower 1990-2030 emissions by at least 55%.

In this video, we tackle a number of questions: what can investors do and how can we help define the right approach to mitigating climate change? How do you get to a Paris-aligned portfolio – what are the different ways you can decarbonise a portfolio? How do you find the corporates that want to change – is there enough data or tools that Federated Hermes have access to allow them to do this job thoroughly? And what parts of the credit market are suitable for this decarbonisation strategy?

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