Stockholm (NordSIP) – Motivated by the increased incidence of extreme weather events, the rising threat they pose and the urgency underlined by the latest IPCC report, global efforts to fight the climate crisis have intensified. To address this concern, Federated Hermes, a London-based asset manager, announced the launch of the Federated Hermes Climate Change High Yield Credit Fund.
The fund is a UCITS product and was seeded by and designed in partnership with Sweden’s National Pension Fund AP1. The new impact fund aims to generate long-term, risk-adjusted outperformance by investing in attractive high-yield credit instruments and deliver positive impact that supports a low-carbon future. This announcement builds on AP1’s existing relationship with Federated Hermes, which was appointed to manage one of the Swedish pension fund’s Global High Yield investment mandates in 2017.
“We are pleased to help bring the Climate Change Fund to the market, a fund we have worked intensely on with the Federated Hermes Credit team for the past year,” says Tina Rönnholm (pictured), Portfolio Manager responsible for external High Yield investments at AP1. “Having divested from fossil fuels throughout our portfolio last year, our ambition now and going forward is to contribute to getting absolute emissions down significantly in the real economy. Providing financing to facilitate a much-needed transition across sectors is an example of the actions we undertake in order to meet our net zero target we are determined to achieve. We recognize the need for collaborative action and financing and by helping launch this fund vehicle, we hope fellow investors will join us in driving change.”
The investment process will use Federated Hermes’ proprietary Climate Change Impact (CCI) Score framework to reflect the progress and impact towards decarbonisation that holdings are making. The Fund will filter out companies where engagement on climate change transition has failed and will exclude controversial sectors and heavy greenhouse gas-emitting issuers that have no desire to change.
Fraser Lundie, Head of Credit and Lead Portfolio Manager, at the international business of Federated Hermes, will be lead manager on the Fund working alongside Nachu Chockalingam, Senior Credit Portfolio Manager, as co-manager. Both managers have extensive experience in high-yield credit and relative-value investing across the capital structures of companies worldwide and will be supported by a 12-member credit team including Mitch Reznick, Head of Research and Sustainable Fixed Income. The team’s dedicated fixed income engagers, supported by EOS at Federated Hermes, will seek positive action on climate change through a robust engagement plan with the portfolio holdings.
“The global high-yield market offers great opportunities to identify attractive companies with the willingness and ability to change their operations, products or services in order to generate positive impact for the planet,” added Lundie. “This Fund is a natural extension of our existing credit offering and demonstrates our commitment to making a real difference for our climate and for future generations. We have always admired AP1 for setting a high bar when it comes to delivering long-term sustainable returns for its retirees and we are delighted that our pioneering and innovative approach to credit investing has enabled us to join forces once again.”
Image courtesy of AP1