Four years after being appointed to manage one of AP1’s global high yield investment mandates, the credit team of the international business of Federated Hermes has joined forces with the Swedish pension fund to launch a Ucits fund that supports a low-carbon future.
The Federated Hermes climate change high yield credit fund was seeded by and designed in partnership with AP1.
The sum invested has not been disclosed.
Fraser Lundie, head of credit, will be lead manager working alongside Nachu Chockalingam, senior credit portfolio manager, as co-manager.
The investment process will include using proprietary framework – the Climate Change Impact (CCI) Score – to reflect the progress and impact towards decarbonisation that holdings are making.
The fund will not hold companies where engagement on climate change transition has failed and will exclude controversial sectors and heavy greenhouse gas-emitting issuers that have no desire to change.
Positive for the planet
Tina Rönnholm, portfolio manager responsible for external high yield investments at AP1, said: “We are pleased to help bring the Climate Change Fund to the market, a fund we have worked intensely on with the Federated Hermes Credit team for the past year.
“Having divested from fossil fuels throughout our portfolio last year, our ambition now and going forward is to contribute to getting absolute emissions down significantly in the real economy.
“Providing financing to facilitate a much-needed transition across sectors is an example of the actions we undertake in order to meet our net zero target we are determined to achieve. We recognise the need for collaborative action and financing and by helping launch this fund vehicle, we hope fellow investors will join us in driving change.”
Lundie added: “The global high-yield market offers great opportunities to identify attractive companies with the willingness and ability to change their operations, products or services in order to generate positive impact for the planet.
“This fund is a natural extension of our existing credit offering and demonstrates our commitment to making a real difference for our climate and for future generations.
“We have always admired AP1 for setting a high bar when it comes to delivering long-term sustainable returns for its retirees and we are delighted that our pioneering and innovative approach to credit investing has enabled us to join forces one again.”