Stockholm (NordSIP) Lombard Odier Investment Managers have launched a new bond fund, the Global Climate Bond Fund, with the objective of combating climate change. The initiative is an outgrowth of the strategic partnership between Lombard Odier IM and Affirmative Investment Management (AIM), a fixed income fund manager focused exclusively on impact investment.
The Global Climate Bond Fund is a diversified portfolio with high credit-worthiness. Its objective is to promote a climate-resilient economy, cut back on CO2 emissions and limit the effects of climate change, while targeting higher returns than traditional portfolios. Investors will be interested in the potential for products that provide positive environmental and climate impacts that, simultaneously, potentially enhance risk and return.
Funds investing in so-called “climate bonds” invest in products issued by governments, international organizations, local authorities, businesses and other leveraged interests to finance activities and projects that promote adaptation to climate change and seek to help mitigate its effects. This includes “eco-labelled” green credit products, a market that has grown 159% on a yearly rolling basis since 2013, and products that conform with the UN’s sustainable development goals.
The objective is to identify investments that generate favourable climate-related results in areas such as renewable energy, resource efficiency, land management, water resources, physical infrastructure and marine environments. These funds also seek investment opportunities in under-funded areas such as climate change adaptation, where 90% of investments today go towards mitigation measures in developing countries. These account for 65% of investment needs, but receive only 17% of today’s investments.
Investors can hereby take advantage of an investment process which combines its partners’ strengths, where Lombard Odier’s experts in impact investing complement AIM’s independent verification methods that control for strategy impacts. Lombard Odier IM’s analytical resources provide AIM’s experienced fixed income team with the optimal basis for creating a portfolio with a positive impact without compromising risk or return. The portfolio is monitored by Lombard Odier IM’s independent risk management team.
“The Climate Bond fund gives hope that we can close the gap between current investments in climate solutions and those required to achieve the Paris Agreement target to limit temperature increase to two degrees,” says Carolina Minio-Paluello (pictured), global product manager at Lombard Odier IM. “The green bond fund market is growing and becoming more dynamic, which increases the opportunity for investors to exert influence. The new fund will allow our investors to mobilize their capital, with a clear knowledge of how the assets will be used, while it generates the same return for the same risk as a traditional fixed income portfolio.”
Stephen Fitzgerald, co-founder and chairman of AIM, added: “Transparency is an important factor for investors in the rapidly growing market for climate-market funds, where the guidelines may still seem vague or arbitrary and there is no uniform standard to judge whether the product really benefits the environment. Therefore, it requires specialist expertise to ensure that investors have access to a wider choice of verified green credit products.”