risks.

The following risks may be materially relevant but may not always be adequately captured by the summary risk indicator and may cause additional loss: Credit risk, Operational risk and risks related to asset safekeeping and Model risk.

TargetNetZero Fixed Income 

Decarbonise, diversify and drive the transition forward

 

Market forces are in action with 140 countries (accounting for 91 percent of greenhouse gas emissions) being subject to climate targets and unprecedented policy support for green technologies. 

Our TargetNetZero Fixed Income strategies enable clients to capture the opportunities and mitigate the risks being generated by economy-wide decarbonisation.

Source: BCG (2021) Unlocking the Potential of Carbon Markets to Achieve Global Net Zero, Credit Suisse, Caixa Bank, Bloomberg Green.

assessing climate exposure.

Climate change is altering the investment universe as we transition towards net-zero emissions. But assessing the climate exposure of a company is complex: the data are incomplete and there are no industry standards. 

At LOIM, we have developed an emissions-analysis tool to measure how well aligned a company is with the goals of the Paris Agreement to limit global warming to well below 2°C. The forward-looking temperature alignment metric, called Implied Temperature Rise (‘ITR’), assesses how a company’s (or portfolio’s) emissions are expected to evolve. It considers whether emissions are increasing, flat or decreasing and, if so, whether they are falling quickly enough. We translate this into a proprietary temperature alignment (‘LOPTA’) score that tells us what level of global warming would result if every actor in the economy were to be managing its emissions with the same level of ambition.

Our goal is simple: to design TargetNetZero strategies in different asset classes that maximise opportunities and reduce climate risk in a global economy in the transition to net zero. 
 

magnitude of the climate challenge.

Companies across all industries and regions need to wean themselves off fossil fuels during a multi-decade transition to meet net zero climate objectives. 
 


Source: LOIM analysis as at 31 March 2022; ClimateActionTracker. For illustrative purposes only. Values are approximate. Not drawn to scale.


This transition has already begun and is gaining speed, driven by powerful forces – policy and regulation, market forces, consumer demand, and the redeployment of capital.  

However, the decarbonisation imperative is yet to be fully reflected in credit markets, creating an opportunity for investors.

why invest?

Carbon footprints alone do not tell us the full picture of climate risks in a portfolio. We believe that maintaining a diversified portfolio that identifies companies on strong decarbonisation trajectories, irrespective of sector, will help accelerate the transition to net zero and potentially provide compelling returns for investors.

  • The net-zero transition will influence bond issuers and investors.
    Some sectors will find this shift easier than others. Companies committed to meeting the Paris Agreement already have a reduced transition risk, but high-emission companies with a clear decarbonisation strategy potentially offer return and diversification opportunities.
  • Access to potentially higher yielding opportunities.
    Forward-looking climate analysis provides us with greater confidence in our credit assessment of issuers, enabling us to identify potentially higher yielding bonds.
    Issuers with ambitious and credible decarbonisation strategies – Irrespective of their current carbon footprints – are more likely to retain access to capital markets and be favoured by investors, in our view.

our TargetNetZero approach.

We aim to decarbonise, diversify and drive the transition forward through the four steps of our TargetNetZero approach:
 

TNZ-FI-footprint.png

Baseline footprint. Assessing the current level of carbon emissions and carbon risk in portfolios, factoring in direct and indirect emissions

TNZ-FI-trajectory.png

Emissions trajectory. Plotting expected emissions trajectories and the necessary level of decarbonisation to align with the Paris Agreement

TNZ-FI-acceleration.png

Potential for acceleration. Considering internal, industry and regulatory developments that may accelerate decarbonisation

TNZ-FI-information.png

Leverage new information. Recalibrating our conviction by integrating new data, corporate and policy commitments


Source: LOIM. For illustrative purposes only. 

why us?

our strategy.

investment process.

investment team.

LOcom-AuthorsAM-Zufferey.png

Yannik Zufferey
Head of Fixed Income

LOcom_AuthorsAM-Parker.png
Ashton Parker
Head of Fundamental Fixed Income Credit Research and Senior Portfolio Manager
locomauthorsam-collet

Jérôme Collet
Head of Beta Portfolio Manager

Erika-Wrangeard-author.png

Erika Wrangeård
Portfolio Manager Sustainability Specialist

LOcom_AuthorsAM-Hohne-Sparborth.png

Dr Thomas Hohne-Sparborth, PhD
Head of Sustainability Research

 

 

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insights.

Why the unexpected Swiss interest-rate cut?
investment viewpoints Institutional
investment viewpoints Institutional Wholesale Fixed Income Swiss Franc bonds

Why the unexpected Swiss interest-rate cut?

The Swiss National Bank surprised with an interest rate cut at its March meeting. What drove monetary policy and how does it impact fixed income investors?

Swiss bonds: how important are credit ratings?
investment viewpoints Institutional
investment viewpoints Institutional Wholesale Fixed Income Swiss Franc bonds

Swiss bonds: how important are credit ratings?

Credit ratings are an important indicator, but they are just one piece of the puzzle for bond investors. We explain the shortcomings and why investment decisions should not be based on ratings alone. 

Measuring climate alignment, one temperature at a time
investment viewpoints TNZ equities
investment viewpoints TNZ equities HolistiQ TNZ Fixed Income TargetNetZero Global Convertible Bond

Measuring climate alignment, one temperature at a time

To maximise investment opportunities and reduce climate risk, we use an implied temperature rise metric to identify which companies are decarbonisation leaders.

CIO views: finding value through patient investing
investment viewpoints Asset Management
investment viewpoints Asset Management Fixed Income Investment strategies DC DB Banks Wholesale Official institutions Third party asset managers Geronne Independants Institutional Consultants Insurance Fund of funds Endowments Equities Macro Multi-asset Alternatives. Convertibles

CIO views: finding value through patient investing

Our CIOs consider how patient investors could find better value. Across asset classes, which areas offer superior prospects to those with a long-term approach?

Fallen angels radar: positive 2024 supply dynamics
investment viewpoints Institutional
investment viewpoints Institutional Fallen Angels Wholesale

Fallen angels radar: positive 2024 supply dynamics

Fallen angels radar is LOIM’s new quarterly tracking which corporate bond issuers have lost their investment grade rating and the trends we see playing out.

Asia credit outlook: Asia and EM credit technical to undergo key reversal
investment viewpoints Asset Management
investment viewpoints Asset Management Institutional Consultants DB DC Insurance Official institutions Fixed Income Asia value bonds Wholesale Banks Endowments Fund of funds Geronne Independants Third party asset managers

Asia credit outlook: Asia and EM credit technical to undergo key reversal

The third of a three-part series on the outlook for Asia fixed income in 2024.

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