Impact Report Launched for LO-Funds Global Climate Bond Fund

Affirmative Investment Management (AIM) publishes first impact report for LO-Funds Global Climate Bond Fund

Affirmative Investment Management (AIM), has released the first annual impact report for the LO Funds – Global Climate Bond. The report details over 1000 projects and initiatives that were fully or partially supported by the impact bonds the Fund invests in. The executive summary of the report can be found here.

The Fund, launched as a result of a partnership between Lombard Odier Investment Managers and AIM in March 2017, is designed to enable investors to benefit from the transition to a greener economy and aims to deliver measurable environmental and social impact in addition to financial performance. In 2017, 92 countries received impact bond commitments and disbursements from the Fund, which invested in support of all 17 Sustainable Development Goals.

Our impact report is an important component of the Fund for investors, evidencing the positive outcomes that result from their capital. The findings, stemming from a portfolio of mainstream fixed income investments, show that a pure play focus to investing, founded on deep analysis and engagement, can be beneficial to both investors and to broader society. The impact bond market has grown 173% on an annualised basis since 2007. As the market and the Fund size increases, so will the positive impact.
— Dr Judith Moore, Partner, Verification & Impact, AIM

AIM surveyed impact bond issuers to collect data on their disbursements, to determine impact indicators across the portfolio. 87% of the Fund’s impact bond issuer disbursements were dedicated to climate change mitigation activities associated with reducing greenhouse gas (GHG) emissions.  The Fund supported the avoidance of 78,431 CO2e per annum, the equivalent to taking 16,795 passenger vehicles off the road for a year, and low carbon transport in 26 countries, with capacity equivalent to 2 million passengers annually.

Other measurable portfolio-weighted impacts highlighted in the report includes:

  • Energy: Investing in energy solutions is critical for meeting the Paris Agreement and decarbonising sustainable development. Access to affordable, low carbon and reliable energy is a sustainable development priority reflected by Sustainable Development Goal (SDG) 7. The Fund supported 75 MW[1] of renewable energy installed capacity and over 244,450 MWh[2] of electricity generated annually, enough to power 19,644 homes in the US for 1 year.

  • Infrastructure: Current levels of investment into improving the energy efficiency of buildings is not on track to achieve a ‘2 degree scenario’. According to the International Energy Agency (IEA), buildings account for up to 40% of direct and indirect greenhouse gas emissions and up to 55% of global electricity demand. The Fund invested in issuers who made disbursements for green buildings in over 30 countries, resulting in 5,670 m² of area built to higher levels of energy efficiency.

  • Water resource management: As populations grow and natural environments become degraded, ensuring sufficient and safe water supplies is becoming more challenging. Promoting water quality and efficiency provides multiple benefits, from improved public health and food security to increased resilience against climate change and greenhouse gas emissions mitigation. The Fund’s impact bonds have supported 6,893 m³ in wastewater being treated daily – the equivalent to more than two Olympic-size swimming pools per day.

  • Financial inclusion and gender: The Fund invested in impact bonds that made disbursements to support SME loans (including microloans) to marginal groups or those in underperforming labour markets. A significant component within the Fund-supported SME loans were those to women-owned businesses (those with at least 51% owned by a woman/women, minimum 20% owned by women with at least one female senior executive, or women holding 30% or more seats on any board of directors). The Fund supported 5,687 SME loans in 17 countries, 4,713 of which were to women-owned businesses in emerging markets. 

About the fund

  • The Fund is a diversified investment grade portfolio seeking to simultaneously deliver a low carbon and climate-resilient economy and mitigate some of the effects of climate change, while targeting a higher yield than a typical investment grade portfolio with lower turnover

  • The portfolio purchases multi-currency denominated green, sustainable or social use-of-proceeds bonds and pure play bonds – only investing in impact bonds verified under AIM’s proprietary SPECTRUM Bond® framework

  • The Fund seeks a higher yield than the Bloomberg Barclays Global-Aggregate Index with comparable credit quality.


[1] MW refers to megawatts, which is equivalent to 1,000 kilowatts. This measures the maximum output of electricity that a generator can produce under ideal conditions at full capacity, representing the renewable energy power potential of a project.

[2] MWh refers to megawatt hours. To understand the unit of MWh: a wind turbine with a 1.5 MW capacity, running at an average 30% capacity for 24 hours over 365 days, will generate 1.5 x 0.3 x 24 x 365 = 3,942 MWh of electricity per annum.

 

Carbon Yield Insights Report Launched

 
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Carbon Yield Insights Report Summarizes Experience of Applying Carbon Yield On Over 55 Green Bond Issuers To Quantify Climate Change Mitigation Impact

Launched in New York at the Sustainable Finance Forum by Affirmative Investment Management (AIM) and ISS-climate, the Carbon Yield Insights Report summarizes the experience of applying the Carbon Yield on over 55 green and sustainability bond issuers over two years, as part of AIM’s impact reporting. The issuers combined have financed over 800 projects across 80 countries.

The Carbon Yield initiative—launched in 2016 with support provided through The Rockefeller Foundation’s ‘Zero Gap’ innovative finance portfolio —is one of the first methodologies to present a comparable, quantifiable metric that can be used by a variety of stakeholders, such as issuers, investors and analysts. The methodology looks at the projects financed via a green bond and then allocates to the bond the greenhouse gas emissions (GHG) mitigated based on the projects’ capital structure[1].

Since 2008, green bonds have presented a viable potential scalable solution to fund climate change mitigation and adaptation projects – growing to over US$340BN in terms of amount outstanding.[2] The vast majority of green bonds aim to fund mitigation-related activities, making them a powerful tool for supporting the Paris Agreement, the global initiative to limit the human-induced global temperature increase from pre-industrial levels to two degrees Celsius within this century.

The scale of mitigation, however, can vary greatly across green bonds and their funded activities. The Carbon Yield methodology provides transparency and information to investors and policymakers about the climate change mitigation potential of diverse projects to guide allocation of capital to optimize for GHG abatement. Investors can aggregate the Carbon Yields of different bonds in their investment portfolios to obtain a portfolio level Carbon Yield. This can then be communicated to their own investors and other stakeholders as part of their impact reporting. By using the Carbon Yield, investors can ensure that the mitigation impacts of their green bond holdings are being calculated consistently.

The new Carbon Yield Insights Report summarizes the experience and five key findings in applying the Carbon Yield, over a broad range of issuers – from European corporations to multinational development banks – and more importantly, a broad range of funded activities across a breadth of geographies.


Key Findings

  1. Renewable energy generation remains the most prominent sector in high Carbon Yield results– that is, renewable energy generation results in larger amounts of GHG emissions avoided per $1,000 invested than any other sector. A global comparison of Carbon Yields shows an inherent bias towards renewable energy generation investments, particularly in emerging markets, due to their carbon-intensive grids and heavy reliance on fossil fuels, when looking at the GHG avoidance results alone. Going forward, as the green bond market expands, it may be more appropriate to compare the Carbon Yields within a region or on a peer basis.

  2. Projects targeting energy efficiency show mixed results. The context in which, and the sector and technology where these efficiencies take place, matters. For some investors, investing in improving energy efficiency in carbon-intensive, fossil-fuel based technologies may be considered a highly impactful strategy and part of a low-carbon transition, while others may find it highly counterproductive in the journey towards a two-degrees future, since the project would make carbon-intensive technologies more competitive and long-lasting. The user of the Carbon Yield data therefore needs to consider the metric in relation to the above – it is not always the case that the larger the number the better.

  3. As a measure of impact on investment – costs matter. Technology capital and operating costs differ across geographies. Project costs and the green bond investment share of the total project cost are also critical to appropriately allocate impact. Currently this information can be very difficult to ascertain, and the report highlights the importance of this type of data in limiting double counting. The Carbon Yield methodology is unique in its guidance on apportioning impact to fixed income investments and recognizes the role of both equity and debt capital for the activities funded.

  4. Carbon Yield results quality is highly dependent on data accuracy and availability. There is a considerable variation in issuer reporting and further disclosure, but in the past two years, there has been improvement, and most issuers are interested and willing to engage with investors, such as AIM, to provide better information. The state of reporting would likely improve if more investors showed a greater interest in the results, which includes querying the reported data and requesting information where gaps exist.

  5. GHG emissions footprint data helps contextualise abatement results. In 2018, AIM and ISS-climate introduced GHG emissions footprint analysis, to supplement the Carbon Yield, a measure of emissions avoidance. This is to help mitigate some of the high baseline effects found in the Carbon Yield – for example, a Swedish green building project may have a low carbon yield, resulting from a smaller differential between project and baseline emissions as buildings are generally built to higher efficiency standards. However, the overall Scope 1 and 2 emission levels may be lower compared with a project in another country yielding higher levels of avoidance due to higher baseline emissions. Both types of information are important.

Looking ahead, as the green bond market continues to grow, and discussions around further standardisation continue to develop, for example the European Union’s High-Level Expert Group on Sustainable Finance (HLEG), the market remains dependent on voluntary initiatives. The AIM team is proud to have co-developed and been the first to apply the Carbon Yield. It is a publicly-available methodology aligned with GHG accounting best practice, designed to promote consistency in reporting around GHG abatement for green bonds. As investors we consider sustainability verification and impact reporting as a critical part of our business.
— Stuart Kinnersley, Co-Founder and Managing Partner, AIM.
It is an honor to be part of pioneering this important methodology. Quantitative estimations of the positive climate impact of green investments is key in effectively addressing climate change, through helping investors to identify projects with the highest climate change mitigation potential.”
— Maximilian Horster, Head of ISS-climate
We are witnessing the devastating daily consequences of climate change around the world, but the cost of addressing this challenge is staggering. The Rockefeller Foundation is proud to support the development of the Carbon Yield, with the goal of spurring investment in effective, impactful green projects.
— Saadia Madsbjerg, Managing Director, The Rockefeller Foundation.

About the Carbon Yield methodology

This methodology, funded by The Rockefeller Foundation, was produced as a collaboration between Lion’s Head Global Partners (LHGP), ISS-ESG and Affirmative Investment Management (AIM). The Carbon Yield does not offer investment advice and does not hold views on any specific investment, investment tool or investment strategy. Download the full summary of the Carbon Yield methodology here or visit the official website http://carbonyield.org/ .


Media contacts

The Rockefeller Foundation

Kavita Tomlinson, Dey

ktomlinson@dey.nyc

ISS

Sarah Ball, Associate Director, ISS

sarah.ball@issgovernance.com

 

Affirmative Investment Management

Lisa Wong, Partner, Impact

Lisa.wong@affirmativeim.com


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About Affirmative Investment Management (AIM)

Affirmative Investment Management Partners Limited (AIM) is a dedicated green and social bond asset management company. It is an independent, owner managed Private Company established in 2014. AIM comprises of a team of individuals who have been strong advocates and instrumental in the evolution of the green bond market. Creating the original green bond eligibility template, the world’s first green bond fund and the longest performance track record in the market place demonstrating no sacrifice to investment return.  AIM investments support the 17 UN Sustainable Development Goals and the Climate Change Paris Agreement (UN COP 21) and our approach is a fusion of mainstream portfolio management and sustainability principles. For more information, visit www.affirmativeim.com

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About ISS ESG

ISS ESG is the responsible investment arm of Institutional Shareholder Services Inc., the world’s leading provider of environmental, social, and governance solutions for asset owners, asset managers, hedge funds, and asset servicing providers. Under the ISS ESG umbrella are three discrete units that draw on deep historical and industry expertise, including: ISS-ethix, which enables investors to develop and integrate responsible investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions; ISS-climate, which provides data, analytics and advisory services to help financial market participants understand, measure, and act on climate-related risks across all asset classes; and ISS-oekom, which provides corporate and country ESG research and ratings and enables its clients to identify material social and environmental risks and opportunities including through advisory services. ISS ESG clients rely on the expertise of all three to help them integrate responsible investing policies and practices into their strategy and shareholder voting decisions. For more information, visit issgovernance.com/esg.

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About Rockefeller Foundation

For more than 100 years, The Rockefeller Foundation’s mission has been to promote the well-being  of humanity throughout the world. Together with partners and grantees, The Rockefeller Foundation strives to catalyze and scale transformative innovations, create unlikely partnerships that span sectors, and take risks others cannot –or will not. For more information, please visit www.rockefellerfoundation.org.


[1] The Carbon Yield enables investors to determine the potential avoided emissions of Green Bonds.

[2] Bloomberg, as of August 2018

Affirmative Investment Management (AIM) Launches AIM US$ Liquid Impact Fund LLC

May 16, 2018

LONDON, UK – Today, Affirmative Investment Management (AIM) announces the launch of its latest impact fund:  the Delaware based AIM US$ Liquid Impact Fund LLC (US$ LIF).  The market for fixed income impact investments has been growing rapidly. US$ LIF is managed by AIM’s portfolio management team, led by Justin Eeles, Partner.  AIM has a track record of managing impact bond strategies since 2015.

The US$ LIF only invests in high grade issuances that have been evaluated and approved by AIM’s in-house Verification team. In addition to sustainability criteria, the evaluation process focuses on the engagement and transparency of reporting by the issuer and the measurable impact of the underlying proceeds. To align with AIM’s mission to help mobilise capital to address the major challenges the world faces, the fund supports those issuers that have demonstrated a commitment to aiding the transition to low carbon growth and supporting the UN Sustainable Development Goals.

The launch of the US$ LIF is testiment to AIM’s commitment to offer a pure play debt impact product across the entire yield curve.  We hope this will lead to an increased supply at the short end, helping to broaden, deepen and grow the overall impact bond market, something AIM is committed to facilitating.
— Stuart Kinnersley, Managing Partner

AIM has been running the Liquid Impact strategy for almost 3 years. Last July, AIM issued the landmark annual impact report for this strategy. This incorporated the Carbon Yield metric which AIM helped develop with key partners:  Lions Head Global Partners and South Pole Group (now ISS Ethix), and funded by The Rockefeller Foundation.

The Lombard Odier Global Climate Bond Fund, managed by AIM, was awarded ‘Green Bond Fund of the Year’ by Environmental Finance in March 2018. AIM has also recently announced a strategic Alliance Partnership with Colonial First State (CFS) and the launch of the Affirmative Global Bond Fund in Australia on the CFS platform.

 

Contact

Alya Kayal at Alya.kayal@affirmativeim.com

 

About Affirmative Investment Management

Affirmative Investment Management Partners Limited (AIM) is the first dedicated impact bond manager focusing solely on bond and cash investments that generate positive environmental and social externalities. It is an independent partnership established in 2014 with 19 investment professionals and is headquartered in London with representatives in Washington and Sydney.

AIM investments support the 17 UN Sustainable Development Goals (SDGs) and the Paris Agreement on climate change (UN COP 21) and their approach is a fusion of mainstream portfolio management and sustainability principles.

AIM will provide an Annual Impact Report on the US$ LIF’s impact from activities funded, such as water saved, and CO2 emissions avoided. This also allows AIM to ensure the bonds continue to meet the Fund’s sustainability and ESG criteria and align to UN SDGs.

Colonial First State announces new Alliance Partner offering

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Colonial First State (CFS) has unveiled its latest strategic Alliance Partnership with Affirmative Investment Management (AIM), to facilitate a new global fixed income offering, the Affirmative Global Bond Fund. This partnership brings the world’s first dedicated impact bond fund manager to retail investors in Australia and addresses a growing demand for impact investing.

AIM’s unique investment approach focuses solely on fixed income and cash investments that generate positive environmental impacts and social benefits, without compromising financial returns - it is a fusion of mainstream portfolio management and sustainability. Drawing on the experience of a team of leading experts in investment, sustainability and fixed income portfolio management, AIM strives to deliver positive solutions to global challenges.

CFS’s Affirmative Global Bond Fund is a diversified investment grade portfolio investing for the medium to long-term. Its investable universe consists only of issuers and issues that meet strict ESG and impact criteria.

The new Fund reflects the growing demand for investment products that adopt meaningful and measurable sustainable practices.
It enables our investors who wish to make a positive impact on society and the environment to mobilise their capital with a clear understanding of how their assets will be deployed, without compromising on risk or returns.
Our strategic partnerships are with highly specialised global investment managers that enable exclusive access to a broader suite of funds and we are delighted to be bringing the Affirmative Global Bond Fund to the Australian market.
— Peter Chun, General Manager Distribution, Colonial First State
Responsible investing has often been perceived as coming at a cost: either lower returns or increased risk. Our approach seeks to combine mainstream portfolio management and impact, without compromising either. Our partnership with CFS is an exciting opportunity to finance positive solutions to global challenges with a trusted Australian partner.
— Stephen Fitzgerald, Co-Founder and Managing Partner, AIM

The Affirmative Global Bond Fund will initially be offered on CFS’s FirstChoice and FirstWrap platforms from May 2018, alongside other Alliance Partners of Colonial First State, including Acadian, Aspect, Generation and Sanlam.

The establishment of an Alliance Partnership in the impact bond space forms part of CFS’s strategy to address climate change by helping Commonwealth Bank of Australia fund $15 billion of low carbon projects by 2025.

Editor’s Note: Stephen Fitzgerald will be presenting at the Colonial First State Investment Roadshow early in May. Please contact media@cba.com.au for further information.

 

Contact:

CBA Media - media@cba.com.au, +61 2 9118 6319

AIM - kate.temby@affirmativeim.com, +61 2 8074 3860

 

 

About Colonial First State

Colonial First State (which includes Colonial First State Investments Limited ABN 98 002 348 352 AFSL 232468 (CFSIL) and Avanteos Investments Limited ABN 20 096 259 979 AFSL 245531 (Avanteos) (trading as Custom Solutions) is the issuer of investment, superannuation and retirement products to individuals and corporate and superannuation fund investors, as well as being the operator and administrator of investment platforms.

CFSIL and Avanteos are owned ultimately by Commonwealth Bank of Australia ABN 48 123 123 124. The Commonwealth Bank of Australia and its subsidiaries do not guarantee performance or the repayment of capital of Colonial First State (including CFSIL and Avanteos).

This document may include general advice but does no take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) available from the product issuer carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. PDSs for Colonial First State products are available at www.colonialfirststate.com.au.

About Affirmative Investment Management

Affirmative Investment Management Partners Limited (AIM) is the first dedicated impact bond manager focusing solely on bond and cash investments that generate positive environmental and social externalities. It is an independent partnership established in 2014 with 19 investment professionals and is headquartered in London with offices in Washington and Sydney.

AIM investments support the 17 UN Sustainable Development Goals (SDGs) and the Paris Agreement on climate change (UN COP 21) and their approach is a fusion of mainstream portfolio management and sustainability principles.

AIM delivers mainstream financial returns with positive environmental and social impact. Through its ongoing engagement with bond issuers to provide transparency and reporting, AIM provides an Annual Impact Report on the portfolio’s impact from activities funded, such as water saved and CO2 emissions avoided. This also allows AIM to ensure the bonds continue to meet the Fund’s sustainability and ESG criteria and align to UN SDGs.

IDA's Road to the Capital Markets

On April 19, 2018, the International Development Association (IDA) made its debut in the capital markets, joining a select group of top-tier supranational issuers with its first bond—a US$1.5 billion benchmark on the back of an orderbook totalling US$4.6 billion from investors around the world.

International Year of the Reef 2018

On 14 February, the Prince of Wales' International Sustainability Unit hosted 'International Year of the Reef 2018 – An Opportunity for Increasing Coral Reef Resilience Through New Collaborative Models’, which was attended by key representatives from the public sector, private sector, finance, science and NGO communities. The objective of this day-long meeting was to explore how existing efforts to mitigate the acute threats to reef ecosystems - from climate change, pollution and overfishing - can be scaled up and how different sectors can collaborate to provide financial incentives to improve coral reef health and resilience.

A member of the Board of the Great Barrier Reef Foundation since 2010, Stephen Fitzgerald participated in the panel discussion, alongside GBRF Managing Director, Anna Marsden, and they subsequently welcomed HRH The Prince of Wales to Australia’s Lady Elliott Island, for a round table and tour earlier this month. Attended by senior executives from BHP, Qantas and Lendlease, as well as Great Barrier Reef Marine Park Authority head, Russ Reichelt and top reef scientist, Ove Hoegh-Guldberg, this event also marked the launch of a reef islands restoration project to create a series of ‘arks’ that will provide a haven for thousands of species of reef wildlife and plants in an increasingly challenging environment.

This ambitious programme was initiated with a significant donation from Stephen’s foundation, with matched funding from the Queensland and Australian Governments, and has subsequently been supported by Australian property and infrastructure group, Lendlease.

Green Bond Fund of the Year

The Lombard Odier Climate Bond Fund, managed by Affirmative Investment Management (AIM), has been named ‘Best Green Bond Fund of the Year’ in the Environmental Finance 2018 annual awards.

With the winners of these prestigious awards decided by a panel of major participants within the green bond market, this accolade is clear recognition of AIM’s pre-eminence in impact bond investing. We believe it endorses AIM’s pure play focus, investing only in green and social impact bonds which withstand our rigorous in-house verification process, as well as our commitment to providing detailed impact reporting on every strategy we manage.

Please find below a link with more detailed information about the Environmental Finance announcement and do not hesitate to contact us if you would like to discuss this, or other recent developments within AIM.

Environmental Finance - Green Bond Fund of the Year

AIM Announces Flagship Impact Report

Affirmative Investment Management launches inaugural impact report for its Impact Cash+ fund and co-launches Carbon Yield, an open access green bond impact quantification tool.

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London, 27th June 2017. Affirmative Investment Management (AIM), the dedicated green and social bond fund management company, launched its 2016 Impact Report for the Impact Cash+ fund. The flagship report includes key environmental and social sectors and geographies in which the portfolio is invested; environmental and social impact metrics, and alignment to the United Nations Sustainable Development Goals (SDGs).

AIM is committed to advancing developments in the green and social bond market through impact reporting across its portfolios, and is working with key partners to develop industry tools to facilitate best practice in the green and social bond market. Through active engagement with bond issuers and peers on reporting requirements and practices, AIM seeks greater harmonisation in impact reporting.

AIM has also co-launched Carbon Yield (www.carbonyield.org), along with South Pole Group (climate reporting specialists) and Lion’s Head Global Partners (a financial advisory firm), with funding from the Rockefeller Foundation. The Carbon Yield methodology is open access, and provides a common approach to quantifying the emission reductions or reduction potential of use of proceeds bonds. Carbon Yield calculates the tonnes of CO2 equivalent avoided per year, per unit of capital. AIM is the first investor to apply this methodology to a portfolio: AIM’s Impact Cash+.

In addition to greenhouse gas emissions avoided, AIM is developing additional reporting tools and methodologies in recognition of the broad range of impacts expected and achieved from green and social bonds, such as the estimated number of children vaccinated in developing countries, jobs created and/or retained, or number of people with access to cleaner water.  All of AIM’s investments are mapped against the 17 SDGs.

AIM is committed to engaging the capital markets to bring to scale real solutions for our global environmental and social challenges. Our investments must support the Paris Agreement to limit global warming to 2 degrees Celsius, as well as the SDGs.  Our impact reports are central to this commitment. They provide rigor and transparency for our investors, and through our engagement, push bond issuers to state clearly the intended impacts from the activities they are funding.
— Stuart Kinnersley, Co-Founder and CEO

For further detail on AIM’s 2016 impact reports please contact AIM directly.

Lisa Wong, Partner, Head of Impact

info@affirmativeim.com

Launching A Common Approach To Quantify The Impact of Green Bonds

A First In Quantifying The Climate Change Mitigation Impact Of Green Bonds

The Rockefeller Foundation, Lion’s Head Global Partners, South Pole Group and Affirmative Investment Management launch the Carbon Yield. 

London, 19th June, 2017 - Launched today, the Carbon Yield, quantifies the climate change mitigation that Green Bonds enable, allowing issuers and investors alike to better understand the impact of their activities and portfolios. The methodology for calculating the Carbon Yield is publicly available at www.carbonyield.org.

Pioneered by Lion’s Head Global Partners, South Pole Group and Affirmative Investment Management (AIM), with support from The Rockefeller Foundation, the new methodology comes at a time when the Green Bond market is set to exceed $100bn in issuance and demand continues to outpace supply.

Green Bonds have steadily become one of the most successful instruments for socially responsible investors to harness the power of capital markets in the fight against climate change, allowing for the scaling up of climate change mitigation and adaptation activities. The “greenness” of Green Bonds to date, however, has been a largely qualitative attribute. As the Green Bond market moves towards a greater understanding of what investments enable, methodologies such as the Carbon Yield provide a common framework for issuers and investors to communicate the impact of their cashflows on the environment and enabling more transparent communications - ultimately catalysing further investment in the segment.

Providing a common language on the GHG emissions abatement impact of Green Bonds

Despite significant progress in the harmonisation of reporting across issuers and established voluntary guidelines, such as the Green Bond Principles and Climate Bond Standards, there is no common language in the market on quantifying and communicating the emissions abatement impact of Green Bonds. Whilst many issuers already collect the necessary data to disclose the mitigation impact of their projects, the market does not have a consistent, uniform metric to refer to.  At the same time, investors are attempting to independently calculate the mitigation impact of their portfolios but do not have access to consistent data across issuers.

The open access Carbon Yield methodology provides a common approach to the market resulting in a comparable metric quantifying the mitigation impact of Green Bonds on a prospective basis in terms of GHG emissions avoided per unit of capital per annum through the financed activities.

The impact quantified by the Carbon Yield is expressed in Potential Avoided Emissions (PAE) enabled by the use of proceeds in terms of tCO2e/year/unit of capital. In other words, how many tonnes of carbon dioxide equivalents (tCO2e) are expected to be avoided per year per unit of investment.

e.g. Company Corp. €500 million 02/2025 3.5% 0.735(CY)

(CY) = tCO2e/year/€1,000

This approach seeks to increase transparency in the Green Bond market via a metric which is simple to understand and can be applied to any Green Bond. Significantly this would allow issuers to communicate the Carbon Yield of their framework at the point of issuance of a new transaction. This allows for better comparability across different issuances and easier aggregation of impact across portfolios.

Going forward, the consortium of partners hopes to expand the reporting of the environmental impact of Green Bonds to include factors beyond GHG abatement, such as indicators for water efficiency/savings.

The Carbon Yield methodology is designed to be used by green bond issuers and investors, and is being pioneered by AIM as part of their annual impact reporting published in June 2017, reporting on the mitigation impact per year per $/€1,000 of their impact bond funds.

Mitigating climate change as an investor requires transparency and a possibility to measure. As we all know “what gets measured gets managed”. The carbon bond yield method will give you a chance both on measuring and on transparency. This could become an important tool for long term investors when allocating money and communicating why.
— Mats Andersson, ex-CEO AP4
We are proud to be part of pioneering such a pivotal breakthrough in the Green Bonds space.
Estimating the positive climate impact of green investment is key in unlocking the trillions needed to help curb climate change. We believe that Carbon Yield is the missing piece of this puzzle and unique in its ability to align market players.
— Renat Heuberger, CEO, South Pole Group
Having been at the forefront of the green bond market since the beginning, the AIM team considers the Carbon Yield an important step forward in providing a common approach to measure and articulate green bond mitigation impacts. We are proud to co-develop and be the first to apply the methodology. AIM remains committed to the continued development of environmental and social reporting tools, promoting greater accountability and integrity in the green bond market.
— Stuart Kinnersley, Co-Founder and CEO, AIM
We have been delighted to see the pace at which investors have increased allocations to socially responsible investments, especially the Green Bond market.  We see the Carbon Yield as the next step in the Green Bond market’s evolution to encourage greater participation in the sector and to enable policy makers, NGOs, issuers and investors to monitor the impact and progress of their capital.  It has been a privilege to work with our partners to develop the methodology and we look forward to working with all stakeholders to adapt it in the future, as technology enables more accurate reporting systems to develop.
— Christopher Egerton-Warburton, Partner, Lion’s Head Global Partners
Climate change is a global challenge with devastating daily consequences, particularly for cities and vulnerable populations around the world. At the same time, the cost of minimizing those impacts is staggering, with estimates around $1 trillion annually—we cannot afford to invest in ineffective green projects. The Rockefeller Foundation is proud to support the development of the Carbon Yield to quantify the real mitigation impact of green projects, resulting in increased investments for projects with the greatest environmental impact.
— Saadia Madsbjerg, managing director, The Rockefeller Foundation

 

 

About the Carbon Yield Methodology

This methodology, funded by The Rockefeller Foundation, was produced as a collaboration between Lion’s Head Global Partners (LHGP), South Pole Group (SPG) and Affirmative Investment Management (AIM).  The Carbon Yield does not offer investment advice and does not hold views on any specific investment, investment tool or investment strategy. Download the full summary of the Carbon Yield methodology here or visit the official website http://carbonyield.org/ .

 

Media Contacts

Lion’s Head Global Partners

Gaia De Battista, Director

gaia.debattista@lhgp.com

The Rockefeller Foundation

Kavita Tomlinson, Dey

ktomlinson@dey.nyc

Affirmative Investment Management

Lisa Wong, Partner Head of Impact

info@affirmativeim.com

South Pole Group

Nadia Kahkonen, Communications Manager

n.kahkonen@thesouthpolegroup.com

 

About the Partner Consortium

The Rockefeller Foundation

 For more than 100 years, The Rockefeller Foundation’s mission has been to promote the well-being of humanity throughout the world. Today, The Rockefeller Foundation pursues this mission through dual goals: advancing inclusive economies that expand opportunities for more broadly shared prosperity, and building resilience by helping people, communities and institutions prepare for, withstand, and emerge stronger from acute shocks and chronic stresses. To achieve these goals, The Rockefeller Foundation works at the intersection of four focus areas—advance health, revalue ecosystems, secure livelihoods, and transform cities—to address the root causes of emerging challenges and create systemic change. Together with partners and grantees, The Rockefeller Foundation strives to catalyze and scale transformative innovations, create unlikely partnerships that span sectors, and take risks others cannot—or will not. To learn more, please visit www.rockefellerfoundation.org.

 Lion’s Head Global Partners

 Lion’s Head Global Partners is an FCA regulated merchant bank, asset manager and financial advisory firm based in London and Nairobi focusing on Emerging Markets. We provide specialist advisory services in vehicle and transaction structuring, capital raising, business rationalisation and fund management services to Governments, Parastatals, Development Finance Institutions and the private sector. Our expertise lies in bringing capital markets and financial expertise to developing economies, the main sectors we cover are Energy and Infrastructure; Water, Sanitation and Agriculture; Capital Markets Development and Financial Inclusion; and Education and Healthcare. We are the Fund Managers of the Africa Local Currency Bond Fund, which was seeded by KfW and now has participation by the IFC and FSDA, and are currently structuring an off-grid solar receivables fund for the AfDB which we will also be managing. The Partners of Lion’s Head bring experience from long careers at leading international investment bank Goldman Sachs and Morgan Stanley. Bim Hundal, Partner and Chairman of Lion’s Head has over three decades of investment banking experience, including running the Capital Markets programme for Emerging Markets at Goldman Sachs for over 10 years. In 2014, Lion’s Head won the Financial Times and IFC award for “Achievement in Transformational Finance” at the Transformational Business Awards for our establishment, management and advisory role in the Global Health Investment Fund. 

South Pole Group

South Pole Group is a leading provider of global sustainability solutions and services. The company has delivered climate-proven solutions to a wide range of public, private and civil society organisations for over a decade. South Pole Group creates value to its clients in the key areas of corporate climate action, public advisory, sustainable supply chains, green finance, as well as renewable energy and energy efficiency. A pioneer in emission reduction and renewable energy projects, the South Pole Group’s portfolio is at present the largest available on the market. For more information, visit thesouthpolegroup.com or follow the company @southpolegroup 

 Affirmative Investment Management

 Affirmative Investment Management Partners Limited (AIM) is the world’s first dedicated green and social bond fund management company. It is an independent, owner managed Private Company established in 2014. AIM comprises of a team of individuals who have been strong advocates and instrumental in the evolution of the green bond market. Creating the original green bond eligibility template, the world first green bond fund and the longest performance track record in the market place demonstrating no sacrifice to investment return.  AIM investments support the 17 UN Sustainable Development Goals and the Climate Change Paris Agreement (UN COP 21) and our approach is a fusion of mainstream portfolio management and sustainability principles. For more information, visit www.affirmativeim.com 

AIM Selected to Manage New Global Climate Bond Fund

On 1st March, Lombard Odier Investment Managers announced the launch of their new Global Climate Bond investment strategy to help combat climate change. This follows a strategic partnership with AIM, the fixed income manager dedicated to impact strategies.

Climate bonds are debts issued by governments, supranational entities, municipalities, corporations and other borrowers to finance activities and projects designed to help the world mitigate or adapt to climate change and its effects. They include “labelled” green bonds, a market with defined use-of-proceeds that has grown by 159% year on year since 2013,[1] as well as “climate-aligned”, social and sustainability bonds that are deemed to help in the fight against climate change and support the United Nation’s 2015 Sustainable Development Goals.

The LO Funds–Global Climate Bond Fund (the ‘Fund’) is a diversified investment grade portfolio seeking to simultaneously deliver a low carbon and climate resilient economy, or mitigate some of the effects of climate change whilst targeting a higher yield than a typical investment grade portfolio with lower turnover. 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.

AIM will identify investments that provide positive climate-related outcomes such as renewable energy, resource efficiency, land management, water resources, physical infrastructure and marine environment. They will also seek opportunities in under-funded areas, for example climate change adaption, given that 90% of investments are dedicated to mitigation projects today, and in developing countries. Developing countries represent 65% of the need of investment but receive only 17% of the investments today.[2]

Investors benefit from an investment process combining the strengths of Lombard Odier IM and AIM. Lombard Odier’s Impact Office complements AIM’s independent verification process guiding the impact objectives of the strategy. Lombard Odier IM’s credit research resources enhance the coverage for AIM’s experienced fixed income team with the objective to create a portfolio that delivers impact without compromising risk and return. The portfolio is monitored by the independent risk management team of LOIM.

Carolina Minio-Paluello, Global Head of Sales and Solutions at Lombard Odier IM, comments: “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. The increased size and dynamism of the green bond market also goes a long way to improving how impactful investors can be. The new Fund enables our investors to mobilise their capital with a clear understanding of how their assets will be deployed, while generating the same returns for the same risk as a conventional bond portfolio.”

Stephen Fitzgerald, Co-Founder and Chairman of AIM said: “Transparency is a key consideration for investors in the rapidly growing climate bond market, where guidelines around issuance can still appear vague or arbitrary, with no single standard for qualifying projects as being environmentally sound. Expert selection is therefore crucial to ensure investors have a more comprehensive coverage of the full labelled and climate-aligned universe.”

Lombard Odier IM and AIM both have a heritage of sustainability and impact investing. With over 20 years of responsible investment expertise within the Lombard Odier Group, Lombard Odier IM was one of the first institutions to include environmental and social criteria in its financial research, and to offer its clients investment solutions that fully integrate their impact expectations.

About Lombard Odier

Lombard Odier is a leading global wealth and asset manager focused on providing solutions to private and institutional clients.

For 220 years, the firm has been solely dedicated to serving clients and forged a strong tradition of innovation in the way it advises clients, manages investment strategies and develops new technologies.

With 223 billion Swiss francs of total client assets, per end-June 2016, Lombard Odier provides 360 degree wealth management services including among others succession planning, discretionary and advisory portfolio management and custody services.

Lombard Odier Investment Managers (Lombard Odier IM), the Group’s asset management unit, offers its clients a range of innovative solutions including risk-based asset allocation, thematic equity investments, convertible bonds as well as alternative strategies.

One of the world’s best-capitalised banks, with a highly liquid balance sheet, Lombard Odier has grown stronger through more than 40 financial crises and stayed true to its primary vocation of preserving and growing clients’ wealth.

As an independent business wholly owned by its Partners, stability is the watchword. The Partners are able to maintain a long-term vision and to develop mutual trust with their clients.

Lombard Odier Group employs about 2,250 people. Headquartered in Geneva since 1796, the Group has 26 offices in 19 jurisdictions including London, Paris, Zurich, Moscow, Dubai, Hong Kong, Singapore and Tokyo.

About Affirmative Investment Management

Affirmative Investment Management Partners Limited (AIM) is the first dedicated green bond manager focusing solely on bond and cash investments that generate positive environmental and social externalities. It is an independent, owner managed Private Company established in 2014.

AIM investments support the 17 UN Sustainable Development Goals and the Climate Change Paris Agreement (UN COP 21) and our approach is a fusion of mainstream portfolio management and sustainability principles.

AIM’s approach is both unique and new but based on a foundation of experienced professionals, leading innovators and best in class industry support providers. Our co-founders have over 26 years of experience on average.

AIM comprises of a team of individuals who have been strong advocates and instrumental in the evolution of the green bond market. Creating the original green bond eligibility template, the world first green bond fund and the longest performance track record in the market place demonstrating no sacrifice to investment return.

By creating a robust proprietary sustainability verification methodology based on high standards, AIM ensures integrity within our investment universe in a rapidly growing but still nascent asset class.

Through creative innovation of product offerings, pro-active engagement and a pivotal position in the market place, AIM is able to drive and influence new initiatives which will result in a broader and growing Green bond market. AIM is the first fixed income manager to provide an Impact Report across all our portfolios.

[1] Source: Bloomberg green bond issuance data 01 December 2016 – add past performance disclaimer

[2] Source: WEF Green Investment Report