Fixed Income

Climate Bond Investing Risk and Opportunity

We believe sustainable investing involves the assessment of material environmental, social and governance opportunities or risks during the investment process and that climate change, in particular, presents one of the largest risks, but also, one of the greatest investment opportunities for bond investors.

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Four revealing case studies showcasing the latest climate investing techniques for bond investors.

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Our Commitment to Sustainable Investing

$700B+

Sustainable Assets Managed by State Street Global Advisors ¹

20+

Dedicated Specialists for Sustainable Data and Research

45+

Fixed Income Responsible Investment Solutions ²

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Strategy Profiles

Imagine if you could improve your bond portfolios carbon profile, reducing climate risk while keeping risk and return characteristics broadly in place.

This is the rationale behind our Sustainable Climate Bond Strategy, which targets Paris aligned reductions in carbon emissions, fossil fuel and brown revenues exposure, and reallocates capital towards companies benefiting from low carbon technologies. The Strategy also increases exposure to green bonds and those bond issuers investing in the solutions needed to achieve net zero by 2050.

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Climate change poses a significant systemic risk within investment portfolios. However, with risk comes opportunity. The future won't wait. Start your transition today.

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Footnotes

¹ Estimated and unaudited SSGA ESG assets under management as of March 31, 2023 as calculated by SSGA for ESG Accounts. SSGA defines an “ESG Account” as a client account (i.e., fund or separately managed account managed by SSGA) that utilizes an investment strategy that falls into one of the following three categories, which are not mutually exclusive:

Negative ESG Screen, as defined below
Positive ESG Screen, as defined below
Third-Party ESG Index, as defined below

Negative ESG Screen: A “Negative ESG Screen” (also known as an exclusionary screen) is a screen incorporated into the investment strategy utilized for the management of a portfolio that results in the exclusion from the portfolio of securities of issuers that fail to satisfy certain ESG criteria (e.g., because the issuers comprise part of a sector or industry). Negative ESG Screens include but are not limited to SSGA Point of View (“POV”) screens, norms-based screens, Socially Responsible Investing (SRI) screens, and screens provided by other third parties (including client-directed screens). Where a client’s investment agreement and/or investment guidelines specify, or the client otherwise communicates to SSGA that the application of a negative screen is to satisfy a purpose other than ESG (e.g., diversification), such screens do not qualify as a Negative ESG Screen.
Positive ESG Screen: A “Positive ESG Screen” is a screen incorporated into the investment strategy utilized for the management of a portfolio that intentionally includes securities of issuers identified as having positive ESG characteristics (including positive characteristics of sub-components of ESG such as environmental, climate or social characteristics) relative to the issuer’s industry or sector peers. Positive ESG Screens include but are not limited to targeting an overall improvement of a portfolio’s ESG profile as compared to a benchmark or stated investment guideline, measured by an ESG score or an ESG metric or investing only in issuers within an industry or sector that score higher within that industry or sector than the issuer’s peers.
Third-Party ESG Index: An index-tracking client account qualifies as an ESG Account if it tracks a Third-Party ESG Index. An index is deemed to be a “Third-Party ESG Index” if the index methodology incorporates ESG factors or characteristics that are utilized by the third-party index provider to determine which securities are included as index constituents. A client account that utilizes a Third-Party ESG Index as a reference benchmark for performance or reporting purposes, but does not seek to track such index as an investment strategy, does not qualify as an ESG Account unless it meets at least one of the first two prongs of the definition of “ESG Account” set forth above.

The methodology used by SSGA to identify ESG AUM may differ from the methodology used under certain classification and disclosure regulatory regimes. SSGA’s ESG AUM may include AUM of client accounts for which a negative screen is applied at the request of the client for regulatory or other purposes, which may not be disclosed to SSGA, that SSGA believes results in the exclusion from the client’s portfolio of securities based on ESG criteria.”

² Including: Climate Thematic, Negative ESG Risk Screening, Best-in-Class, Green Bonds, and Bespoke ESG Strategies

Disclosures

Information Classification: General

For institutional / professional investors use only.

Marketing Communication

State Street Global Advisors Worldwide Entities.

Investing involves risk including the risk of loss of principal.

The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor's or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor.

All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.

The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified sustainable investment criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s sustainable investment criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.

The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.

Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.

Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

This document provides summary information regarding the Strategy. This document should be read in conjunction with the Strategy’s Disclosure Document, which is available from SSGA. The Strategy Disclosure Document contains important information about the Strategy, including a description of a number of risks.