State Street Corp (NYSE:STT), the second-oldest operating US bank, said its asset management arm has launched a range of climate bond funds to help investors shift their exposure away from carbon emissions and fossil fuels and “fund the transition to a low-carbon future”.
On Monday, the company said the three funds will be benchmarked to the Bloomberg Barclays US, Euro and Global Corporate Bond Indices and will use ESG data to “significantly reduce portfolio carbon intensity while also excluding controversial issuers”.
“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”, State Street said.
Among those investing in the new funds include Finnish pension insurance firm Varma Mutual, which will be injecting US$275mln.
“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”, said Carlo Funk, EMEA head of ESG investment strategy at State Street Global Advisors (SSGA).
“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”, added SSGA’s head of UK institutional distribution Alistair Byrne.