The Affirmative Global Bond Fund seeks to simultaneously create a positive and verifiable environmental and social impact, whilst targeting a total return in excess of the benchmark after fees over rolling three-year periods. We adopt an active management approach, and aim to generate return through currency, sector and duration. We promote robust verification, reporting and active engagement to ensure repeatable performance and sustainable impact in accordance with COP21 and UN SDGs.
We consider our investment approach to be a combination of active management and strong risk discipline. We seek to add financial alpha and positive environmental and/or social impact. Our process is one of positive selection in identifying and verifying impact fixed income securities that offer attractive financial risk/return characteristics, as well as positive impact, and incorporating these into mainstream portfolio management.
Our verification process is designed to identify impact and to incorporate ESG criteria into the selection process for our investable universe. Our investment universe encompasses green, social and sustainable bonds - these are defined as bonds supporting environmental and social activities/projects - and we also include debt of highly sustainable and responsible issuers. The verification process is one of positive selection to identify and screen both issues and issuers for meaningful and measurable impact and we invest only in bonds that fulfil our stringent criteria. These include credit worthiness of the issuer, environmental/social benefits and the ability to determine that proceeds are dedicated to positive impact.
Our verification and credit team build the SPECTRUM Bond® and SPECTRUM aligned universe of eligible bonds for the portfolios through positive selection:
Sustainable - Aligned with our purpose to support the UN SDGs and Paris Agreement on Climate Change.
Positive Externalities - Positive environmental and/or social externality associated with their issuance. Criteria include: social and environmental sectors, geographical and socio-economic context, policy and strategy context.
Credit - Issuers must be credit worthy from both a financial and broader environmental, social and governance perspective.
Transparent - Clear and transparent investment policies and processes on reporting and disclosure. Criteria include: disclosure of project portfolio, project assessment disclosure, commitment to output reporting.
Responsible - Responsible issuers with strong integrity and standards, as well as a clear commitment to a sustainable business model. Criteria include: business practice, motivation, action and affirmation.
Use of Proceeds - Ability to determine use of proceeds to assure funded activities meet the AIM criteria. Criteria include: separate accounting for impact bond proceeds, external review, project alignment.
Measurable Impact - All securities must offer mainstream market yields and provide reporting on the material & measurableenvironmental and social impacts. Criteria include: impact KPIs, baseline and target disclosures, impact reports to stakeholders.
Our credit review starts in verification in what is described as the ‘base credit check’. This is an initial view of the issuer to determine whether the verification team should embark on the full SPECTRUM process. The objective is to ensure we do not waste time on issues that are not going to qualify from a credit perspective.
If the issuer passes the ‘base’ check it will be subject to the full SPECTRUM process, an important part of which is the ESG review, as well as the full credit review.
Our portfolio management team applies a top-down approach to building the portfolio. Their market analysis focuses on fundamental research, market conditions and political environment. By analysing criteria such as valuation, marketing positioning and consensus expectations, alongside economic dynamics and interrelationships, we aim to ascertain where investment opportunities lie (both inter- and intra-regional).
The portfolio management team use a series of indicators/criteria as a framework for determining both the absolute and relative value of bond and currency markets. The indicators provide a structured framework for determining our view of the outlook for currencies and bond markets. These views then feed through to portfolio construction with a risk budgeting focus. The ranking given to each bond market or currency does not mean the top ranked will have the largest weight in the portfolio. Any over- or under- weight will be balanced by the risk associated with each position and with the portfolio as a whole.
Monitoring and reporting on impact
We actively engage with the issuers on an ongoing basis, as the transparency and issuer monitoring pillars are critical in order to guarantee the commitment to reporting by issuers. We perform an ongoing review of the SPECTRUM criteria to ensure the scores are kept accurate and capture any recent changes or controversies.
Our Annual Impact Report details an independent assessment of greenhouse gas reduction and our alignment with UN Sustainable Development Goals, while providing details of projects funded across the portfolio, allowing our clients to monitor, on an annual basis, the impact their investments have made environmentally and socially.
Differentiated Fixed Income offering - The strategy is a diversified investment grade portfolio seeking to simultaneously deliver financial returns from a universe of securities whose proceeds are helping to deliver a environmental or social solutions to the global challenges. The strategy invests in projects which provide adaption and/or mitigation solutions. This fixed income sub-set is increasingly attractive to investors who wish to make a positive impact on the environment and social issues without compromising on risk or returns.
- AIM is one of the world’s first dedicated Green and Impact Bond funds management company. AIM has a team of 19 investment professionals, the senior members of which each have 25 years plus experience.
- In house proprietary analysis
- ESG is at the core of our approach, not an overlay to existing processes.
- A core part of AIM’s differentiated approach is the expectation for issuers to report on the impact from activities funded by the bond proceeds. AIM aggregate this impact data reported by different issuers and provide a comprehensive report to summarise the impacts of their investment portfolios. This differentiates the offering versus traditional Fixed Income peers, as it drives focus on how bond proceeds have been used to fund various sustainability projects.