Lombard Odier Investment Managers, the asset management arm of Geneva-based Lombard Odier Group, has launched an investment strategy targeting climate bonds in partnership with green bond-focused firm Affirmative Investment Management.
The new strategy, dubbed LO Funds-Global Climate Bond Fund, is a diversified investment-grade portfolio of bonds and other fixed and floating-rate debt securities issued by sovereign, corporate and supranational entities to finance environment-friendly projects.
The investment manager noted that the issuance of green-labelled bonds has grown by 159 percent year on year since 2013. According to the Climate Bonds Initiative, there were $694 billion of “climate-aligned” bonds outstanding in 2016.
The portfolio targets a higher yield than typical investment-grade portfolios with lower turnovers, according to Lombard Odier IM. The vehicle has now over $190 million of assets under management.
“This fixed income sub-set is increasingly attractive to investors who wish to make a positive impact on the environment and climate without compromising on risk or returns,” said Lombard Odier IM.
The managers of the fund will identify investment opportunities which cover renewable energy, resource efficiency, land management, water resources, physical infrastructure and marine environment, the two firms said.
They will also look for opportunities in under-funded areas, for example climate change adaption, and in developing countries, they added.
Developing countries represent 65 percent of funding needs but receive only 17 percent of investments today, according to the World Economic Forum’s Green Investment Paper.
“Climate bonds offer a beacon of hope for closing the gap between the current and required levels of investment into climate change solutions in order to meet the COP21 objective to limit climate change to two degrees,” said Carolina Minio-Paluello, global head of sales and solutions at Lombard Odier IM.
“Transparency is a key consideration for investors in the rapidly growing market, where guidelines around issuance can still appear vague or arbitrary, with no single standard for qualifying projects as being environmentally sound,” added Stephen Fitzgerald, co-founder and chairman of London-based AIM.