State Street Global Advisors, the asset management business of State Street Corporation, has launched the State Street Sustainable Climate Bond Funds, which aim to facilitate investors to significantly reduce their exposure to carbon emissions and fossil fuel, while also re-allocating capital to fund the transition to a low-carbon future.
This new fund range therefore enables bond investors to immediately set the direction and ambition for their climate-based investment goals, while also aligning with the goals of the Paris Agreement.
Benchmarked to the flagship Bloomberg Barclays US, Euro and Global Corporate Bond Indices, the three funds apply screens and tilts that help mitigate and adapt for climate impact. The investment approach utilises best-in-class ESG data to significantly reduce portfolio carbon intensity while also excluding controversial issuers. Then, by materially scaling up green labelled bonds, the funds ensure that capital is being allocated to projects and companies that are key to funding the overall transition to a low-carbon future.
Carlo Funk, EMEA Head of ESG Investment Strategy for State Street Global Advisors, says: “This new Sustainable Climate fund range enables investors to manage climate risks in their core corporate bond allocations and increase their exposure to green bonds and companies aligned with the transition, while keeping close to the index returns. Our capabilities in mapping complex ESG data to the fixed income universe combined with our indexing investment expertise are fundamental in developing the investment approach that underpins these climate funds. These funds are evidence of our strength in developing and innovating climate strategies that are urgently required to achieve net zero by 2050.”
Varma Mutual Pension Insurance Company, an earnings-related pension insurance company in Finland, are investing a total of USD275 million in the new funds.
Ann Brännback, Senior Portfolio Manager at Varma, comments: “Varma is aiming to have a carbon-neutral investment portfolio by 2035, so climate change mitigation has long been one of our responsible investments goals. State Street Global Advisors’ Sustainable Climate Bond Funds are closely aligned with our sustainability principles. The funds’ strategy provides us an efficient and diversified exposure to European and US corporate bonds with reduced ESG and climate risks. The diverse ESG factors combined with both climate change mitigation and adaptation make these cost-efficient corporate bond index funds very compelling.”
Alistair Byrne, Head of UK Institutional Distribution at State Street Global Advisors, adds: “Only by building sustainable and resilient investment portfolios at scale, in a way that works across asset classes and for a range of investors, will markets achieve the systemic shift in investment flows required to deliver on the goals of the Paris Agreement. We think that green bonds will play a significant role in the global Covid-19 recovery and our Climate Bonds Funds will finance projects to help companies achieve their carbon reduction goals and beyond, and ultimately lead to a lower-carbon economy in the long-run. Together with our Climate Equity Funds, we are providing investors access to a range of fixed income and equity solutions to effectively manage climate risks in their portfolios while delivering long-term performance.”
Sean Kidney, CEO at Climate Bond Initiative, an investor-focused not-for-profit promoting large-scale investment for climate action, comments: “Helping to reduce the carbon emissions and fossil fuel exposure of capital is crucial as investors increasingly seek to align portfolios with the goals of the Paris Agreement. By partnering with State Street Global Advisors to deliver their innovative Sustainable Climate Bond Funds, Climate Bonds Initiative can continue its mission to scale up investment in green, social and sustainability debt.”
