CarVal Investors launched the CarVal Clean CLO platform. The CLOs managed by the platform will utilize a new ESG risk assessment technology to pursue a high-performing, ESG-optimized portfolio which will be driven by proprietary technology developed by CarVal Investors and Insig AI, a data science and machine learning solutions company. This technology is the first of its kind in fixed income and will cover private as well as public issuers, creating a transparent and auditable risk assessment that allows for comparison to relevant benchmarks.
“The creation of this ESG-compliant platform will expand our CLO offerings to include CLOs that will be managed using our proprietary ESG risk assessment methodology,” Lucas Detor, a managing principal of CarVal Investors, said. “At CarVal, we believe ESG risks can have a material impact on the performance of credit investments. This new model will enable us to measure ESG risk at an issuer and portfolio level to create a unique and attractive product for investors. Ultimately, we believe this strategy aligns with our long-term goals of reducing the cost of capital for ESG-minded companies by creating an independent, auditable and comparable risk assessment model.”
“CLOs were tested through the crucible of the global pandemic-led recession, proving once again the power and robustness of the product structure,” Chris Mawn, who leads the corporate loans team at CarVal Investors, said. “What has emerged is a $1 trillion global CLO market with investors in search of greater ESG integration and transparency. We are launching this new platform to meet this emerging need with the mantra of doing good and doing well without sacrificing returns.”
CarVal’s ESG risk assessment model measures each asset on six themes:
- Climate Change, including carbon emissions and carbon footprint
- Natural Capital, including raw material sourcing and water stress
- Pollution, including toxic emissions and waste
- Human Capital, including health and safety and labor management
- Product Liability, including product safety and consumer financial protection
- Corporate Governance, including ownership and board
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These measurements are then utilized to create a composite ESG risk assessment that is then comparable at an individual credit and portfolio level.
“We are excited to be working in collaboration with CarVal to support the launch of this ground-breaking product line,” Steve Cracknell, CEO of Insig AI, said. “This launch underscores the powerful role that our innovative ESG scoring and interrogation tool can play in enabling asset managers to develop and execute a data-led ESG investing strategy.”
