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Investment Strategies

Address Climate Change in Your Bond Portfolio

Rupert Cadbury, Fixed Income Portfolio Strategist outlines the key features and benefits of the Sustainable Climate Bond Funds

Announcing Our New Sustainable Climate Bond Funds

Imagine if you could improve your bond portfolio’s carbon profile and reduce climate risk, while keeping risk and return characteristics broadly in place.

This is the rationale behind the State Street Sustainable Climate Bond Funds, which adopt a systematic mitigation and adaptation approach that targets Paris-aligned reductions in carbon emissions, fossil fuel and brown revenues exposure, and reallocates capital towards companies benefiting from low-carbon technologies. The Funds also increase exposure to green bonds, adapting companies and bond issuers investing in the solutions needed to achieve net zero by 2050.

Our Four-step Investment Process

1. Start with the Right Universe

Clients can select any standard investment grade or high-yield credit or aggregate benchmark which include corporate bonds. We first incorporate aset of screens that are aligned with our climate and ESG objectives. We then utilise three sets of exclusions based on product involvement and prescriptive regulatory screens.

2. Source the Best Data

We source the highest-quality climate and ESG data from leading dataproviders — Trucost, Climate Bonds Initiative, ISS ESG, MSCI, Sustainalytics and our internal R-FactorTM.

3. Design for Optimal Outcomes

We use a mitigation and adaptation framework to rebalance the portfolio towards companies that will achieve our stated objectives:

Reduce Exposure to companies with worse climate profiles. Eliminate highly polluting sectors

Increase Exposure to green bonds which funds projects that have positiveenvironmental and/or elminate benefits

Increase Resiliency by targeting companies that are positioned to benefitfrom transition to the low-carbon economy.

We then balance the portfolio to target the highest expected risk-adjusted return, given the desired constraints

4. Maximise Value

The portfolio is implemented using an indexed approach to deliver aconsistent, cost-efficient and diversified bond exposure.

The Funds Aim to Achieve the Following Objectives:

Discover More

Read our full commentary for further information on our Sustainable Climate Bond Funds.