What is it about your investment approach that makes this strategy unique?

Many climate products are overly focused on portfolio optics such as emission targets or labels like ‘green’ bonds. These approaches have their merits but can limit the most important objective – delivering real-world decarbonisation and adaptation in the global economy.

Lower carbon funds, including those with Paris-aligned benchmarks, typically avoid exposure to higher-emitting sectors such as utilities, favouring supposed lower-emission sectors like financials.

Our process is different. We identify the primary sources of emissions across critical sectors – energy, transport, materials, real estate, and industrials. We then pinpoint companies with ambitious and credible plans to slash those emissions.

True, we still invest in green bonds. However, we use our in-house green bond framework to ensure credibility and a clear alignment with our climate objective. A label can be a good indicator of climate credentials, but we research a company holistically – its evidence of ambition, credibility, delivery of avoided emissions and real-world climate adaptation.

Climate adaptation is vital to the climate transition journey but is underrepresented in many products. Credit has a key role given the broad set of investable instruments. We think adaptation will continue to grow as credible projects and funding are deployed in this space. 

How do you identify the right investment opportunities beyond green bonds?

First, we help clients capture the climate opportunity by investing across investment-grade and high-yield bonds in developed and emerging markets. This includes up to 50% in emerging markets and up to 40% in high-yield. This approach enables us to capture yield-enhancing market segments. It also means we can invest in companies at different stages of the climate transition journey and across the broadest spectrum of industries.

Second, as mentioned earlier, our strategy is more than a low-carbon or ‘green’ bond strategy. We support companies across industries to deliver the climate transition – focusing on ambitious businesses actively delivering real-world decarbonisation, driving industry change, disrupting sectors, pioneering new technologies, and meeting evolving customer demands.

We believe these leading companies are well-positioned to benefit from the growth in climate-focused investment and potentially outperform their peers. To do so, we identify investments across three pillars.

These three pillars clearly show how we identify upside potential beyond green bonds. We focus on delivering climate impact, which can come from green or brown bonds (issuers raising capital to transition to greener business activities). This offers more growth potential, and a broader opportunity set than 100% green bonds.

What are you most proud of with the strategy?

This fund not only supports our clients but also has a positive impact on the environment through the companies we invest in. Last year, we reviewed the fund's impact over the three years since its launch and were pleased to see the significant positive changes it has contributed to.

This strategy has had a ripple effect across our investment strategies. The innovative framework has been integrated into other credit strategies enhancing their sustainability credentials and helping secure significant mandates, the most recent of which is worth $3 billion.

We offer clients a robust investment process that addresses climate mitigation and adaptation. Our commitment to this ensures that we are not only meeting the financial goals of our clients but also driving meaningful environmental change.

The companies we invest in are...

How do you engage with companies?

We engage with companies throughout the investment lifecycle, in line with our dual objective of enhancing financial returns and having a genuine climate impact.

This approach helps uncover overlooked opportunities. Take HT Troplast, a leader in plastic profiles for windows and doors. At first glance, it seemed an unlikely climate investment: no MSCI rating, no CDP disclosures, no sustainability report, and minimal transparency.

Yet, through our bottom-up research and engagement, we discovered a high-quality climate transition solutions provider. HT Troplast’s cutting-edge window frames prevent energy loss by up to 50%, reducing heating needs and lowering energy consumption across nearly 100 countries. Its revenues are fully aligned with the EU Taxonomy, and its commitment to sustainability runs deep: it’s a founding member of a PVC-U window frame recycling initiative, which repurposes old frames, cutting greenhouse gas emissions by 90%.

This year, HT Troplast will release its first sustainability report – an opportunity for us to collaborate and help it produce a best-in-class document. We’ll also encourage the publication of EU Taxonomy revenue alignment, request carbon data, and set a clear milestone for an operational carbon target.

What’s your outlook for climate investing, given many market distractions away from sustainable investing?

There has been some political pushback against climate investing in some quarters. This is disappointing but won’t change the direction of travel for capital markets. As such, we believe the outlook remains positive. Interest in climate-related investments is strong, while the opportunities within climate transition are vast and continuously evolving.

The field of climate transition is also dynamic, with ongoing advancements in technology, regulation, and consumer behaviour presenting new investment opportunities. We therefore think there’s ample room for growth and innovation, making it unlikely that these assets will become overvalued solely due to rising demand.

What are you hoping to achieve over the next four years?

After four years, we’ve proven we can deliver on our dual climate and return objectives. We’ll look to maintain this high bar.

We think there’s great potential to deliver attractive total returns for our clients. The market dynamics of lower growth, central bank rate-cutting, and good company fundamentals provide a favourable backdrop.

From a climate perspective, we never stand still in terms of the scope of our research. We’ll continue working to unearth the best ideas across all industries. We’ve already seen significant progress from the companies in which we invest. Going forward, we’ll continue to seek out businesses with the greatest potential to deliver real-world decarbonisation and adaptation.