NEST invests USD 2 billion in Climate Transition Credit Strategy

Wells Fargo Asset Management Launches Climate Transition Credit Strategy

Wells Fargo Asset Management (WFAM) announced the launch of its Climate Transition Global Investment Grade Credit to help investors simultaneously achieve their climate and financial goals, with a focus on  supporting the ‘climate transition’ and the decarbonisation of the economy.

The strategy is used with investors including the UK’s National Employment Savings Trust (Nest), which converted its existing $2bn WFAM allocation to the Strategy earlier this year, in alignment with its climate policy. Portfolio management of the Strategy resides with WFAM’s Global Fixed Income team, led by Scott Smith, head of Multi-Sector Investment Grade, and Henrietta Pacquement, head of Investment Grade Credit Europe, supported by a team of more than 70 fixed income research analysts located across the globe.

The Strategy combines meeting typical financial objectives for active fixed income investing with a specific set of climate goals, focused on:

• Actively managing security selection to identify those firms that are best placed and prepared to perform through the transition to a low/net-zero carbon world
• Using exclusions in a targeted manner
• Initially reducing weighted average carbon intensity to at least 30% below the benchmark
• Decarbonising portfolios by 2050, if not before
• Engaging with issuers to enhance climate and financial performance

Commenting on the launch, Deirdre Flood, head of International Client Group at Wells Fargo Asset Management, said, “At Wells Fargo Asset Management, we believe we must collectively decarbonise the economy to manage climate change in a responsible way. As an asset manager, we believe we can invest deliberately to advance this profound transition and I am therefore proud to announce our Climate Transition Credit Strategy, which is grounded in that philosophy. We are also honoured to have an important investor in Nest, who shares in our belief that investors must go beyond approaches such as divestment and tilting, and look to channel capital into companies with the most promising initiatives.”

Also commenting on the Strategy, Diandra Soobiah, Head of Responsible Investment at Nest, said, “The response of WFAM to our climate change policy has been excellent. Their strategy provides us with a robust and measurable framework to decarbonise over time and support the climate transition, helping us to align our portfolio with our net zero ambitions. It’s important fund managers take the risks of climate change seriously. Our members are likely to be significantly impacted if climate change isn’t addressed, with a strong chance of lower returns at retirement. We commend WFAM for showing leadership in addressing climate-related risks and opportunities in fixed income, enabling us to continue to meet our financial objectives in this asset class.”