Climate Change High Yield Credit Fund

High-conviction investment in companies making a positive climate impact

Earth in the hand

Our focus

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A dual objective to deliver strong financial performance and a positive impact through decarbonisation. We have a high conviction, flexible approach - targeting companies with strong fundamentals to generate returns - investing across geographies, instrument types and credit curves.

Green pin with statistics

Our proprietary internal scoring framework conveys a company’s progress towards the low-carbon transition.

Hand with a clenched fist

Engagement encourages companies to pursue and to respect decarbonisation commitments. Companies in genuine transition have the potential for material, positive impact.

Purse in hands icon

The principal members of the investment team have worked together since 2004 to deliver attractive high-yield credit returns.

COP26: Amplifying the voice of investors.

The vital role of stewardship in the last stand against climate change.

Fund Highlights

  • Sustainable investment objective By investing in companies that are adapting to reduce their climate impacts, we seek to deliver a carbon footprint lower than the benchmark index
  • Performance target 1.5% p.a. gross outperformance over rolling three-year periods
  • Benchmark ICE BoA Global High Yield Constrained Index, hedged to US dollar
  • Portfolio Managers Fraser Lundie, CFA, Nachu Chockalingam, CFA1
  • Universe Global high-yield credit
  • Instruments Primarily high-yield corporate bonds and derivatives
  • Number of issuers Approximately 100-150 issuers
  • Base currency US dollar, hedged
  • Liquidity Daily
  • Exclusions Fossil fuels, Tobacco, Controversial weapons and companies in contravention of the principles of the UN Global Compact
  • SFDR product categorisation Article 9

Targets cannot be guaranteed. 1CFA ® is a trademark owned by the CFA Institute.

Why invest

Targeting strong returns through the cycle

By exploiting differences in relative value throughout issuers’ capital structures

Global diversification

Creates more stock-picking opportunities while focussing on high-quality credit

Greater liquidity

By selecting securities from companies with large capital structures

Risk aware

Identifies risk (from default risk to portfolio duration) through cross-sectional analysis

Evidence-based investment

Proprietary analytical tools and engagement skill help price sustainable factors

Our proprietary Climate Change Impact Score

Our bespoke framework conveys a company’s willingness to decarbonise and its potential to reduce its carbon footprint.

 

The Climate Change Impact Score uses a one-to-five scoring system that assesses a company’s decarbonisation progress and the impact it has made towards the low carbon transition. These scores, together with the insights from our dedicated engagers, inform our portfolio construction.

Decarbonisation pathway

To generate positive impact, we actively seek holdings with attractive long-term investment fundamentals as well as the willingness to decarbonise their operations, products or services.

step by step diagram form assess climate data to build and manage portfolio
step by step diagram form assess climate data to build and manage portfolio

2CCI denotes our proprietary Climate Change Impact Score.

Leading the way in climate-related engagement

How does Federated Hermes influence climate impact through engagement?

  • Climate change is one of four priority themes for engagement by our stewardship team, EOS, in 2021
  • Leading player in Climate Action 100+ (CA100+)
  • Significant experience using escalation techniques
  • Author of CA100+ Investor Expectations on Oil & Gas, Utilities, Mining, Auto, Banks
  • Federated Hermes among five asset managers to score highest on climate-related engagement and resolutions with A+ ranking
Mountains

Supporting the transition to a low carbon future

Watch our videos: Identifying stock opportunities in high-yield credit

Team

Fraser Lundie
Fraser Lundie, CFA
Head of Credit
Nachu Chockalingam
Nachu Chockalingam, CFA
Senior Credit Portfolio Manager
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Credit team members

Supported by

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Responsibility Office professionals
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EOS at Federated Hermes professionals

Our Purpose

To deliver Sustainable Wealth Creation

 

Like all our investment capabilities, Federated Hermes Climate Change High Yield Credit aims to deliver Sustainable Wealth Creation: the generation of wealth through investments that enrich investors, society and the environment over the long term.

To find out more about the Climate Change High Yield Credit Fund