Wells Fargo Asset Management (WFAM) launched a climate transition global investment grade credit strategy to help investors simultaneously achieve their climate and financial goals, with a focus on supporting the ‘climate transition’ and the decarbonization of the economy.

The strategy is used with investors, including the UK’s National Employment Savings Trust (Nest), which converted its existing $2 billion 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, and 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, focusing 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
  • Decarbonizing portfolios by 2050, if not before
  • Engaging with issuers to enhance climate and financial performance

“At Wells Fargo Asset Management, we believe we must collectively decarbonize the economy to manage climate change in a responsible way,” Deirdre Flood, head of the international client group at Wells Fargo Asset Management, said “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.”

“The response of WFAM to our climate change policy has been excellent. Their strategy provides us with a robust and measurable framework to decarbonize over time and support the climate transition, helping us to align our portfolio with our net zero ambitions,” Diandra Soobiah, head of responsible investment at Nest, said. “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.”