We are helping investors understand, control and benefit from the quantifiable trade-offs between carbon reduction and tracking error. Most importantly, we are demonstrating that significant improvements in carbon intensity can be achieved with minimal impact to credit quality or interest-rate risk relative to corporate bond benchmarks.
The State Street Low-Carbon Corporate Bond Strategy is a long-only investment approach that enables the creation of customized portfolios that can minimize tracking error for a targeted level of carbon reduction or maximize carbon reduction for a targeted level of tracking error.
As investors look to align their portfolios with the transition to a low-carbon economy and minimize potential exposure to climate risk — which could arise from regulation and carbon tax — the Low-Carbon Corporate Bond Strategy provides a straightforward, effective way to take the first step.
The State Street Low-Carbon Corporate Bond Strategy seeks to create customized portfolios with a lower carbon footprint and similar returns to the performance of the client’s selected fixed income benchmark.
The Strategy is designed to create customized portfolios that achieve the client’s goals for carbon reduction within constraints for tracking error, credit quality, duration, interest rate exposure and other factors.
Clients select a target range of carbon reduction that they would like to achieve, relative to the benchmark index.
Clients select the benchmark to represent their chosen starting universe; available benchmarks include any diversified developed market corporate bond index.
Using this strategy we can now create customized portfolios for clients that have significantly lower carbon footprints but nonetheless produce similar returns to their selected fixed income benchmarks.
The strategy is available now to help investors reach their goals for reducing carbon emissions without compromising their investment objectives.