Schroders and Blue Orchard debut EM climate impact fund

Schroders and emerging markets impact specialist BlueOrchard have launched a climate impact strategy targeting positive environmental change in emerging markets.

The Schroder ISF BlueOrchard Emerging Markets Climate Bond fund, a UCITs strategy offering daily liquidity, will invest in mainly emerging markets green bonds and support the United Nations’ climate-related Sustainable Development Goals.

Schroders and BlueOrchard last year unveiled their first investment cooperation with the launch of the BlueOrchard Covid-19 Emerging and Frontier Markets MSMEs Support Fund that aims to underpin more than 200 million jobs.

The investment universe of the climate bond fund will encompass financing and re-financing projects with clear environmental, green or social benefits such as renewable energy, energy efficiency, green buildings and clean transportation.

It will allocate to sustainability and sustainability-linked bonds, whose outcomes are tied to the financing of social projects, as well as environmental initiatives.

According to Schroders research, emerging markets are the most vulnerable to the impact of climate change. In addition, the issuance of green bonds is expected to double from $1trn in 2020 to $2trn by 2023 with emerging markets set to increase rapidly.

Clients globally excluding the US will benefit from BlueOrchard’s renowned impact investment expertise, combined with Schroders market-leading investment resources and global distribution network.

The fund will benefit from BlueOrchard’s independently verified impact management and ESG investment process by which BlueOrchard monitors, measures and implements impact goals and ESG risk factors while maximising positive impact. This process is supported by a dedicated team of impact management experts.

Michael Wehrle, head of investment solutions, BlueOrchard, said: “Delivering green finance for emerging markets is key to building a low carbon world of the future. Green bonds represent a powerful opportunity to pursue positive environmental change, while also earning attractive fixed income returns.

“Investing in these growing opportunities will not only mean investors are contributing to a lasting positive impact to climate change mitigation in markets with the fastest growth, but are also delivering robust performance for their portfolios.”

Carolina Minio Paluello, global head of product, solutions & quant, Schroders, said: “Climate change is one of the key global threats, with Schroders Climate Progress Dashboard indicating that global temperatures are still on course to rise by 3.6°C. As investors, we can create change in the world by the way we direct capital, putting it into areas that can generate positive impacts.

“This new fund will enable us to leverage our expertise and knowledge within public and private markets to maximise our investment impact across emerging and frontier markets to best meet the investment objectives of our clients.”

BlueOrchard is a founding signatory of the Operating Principles for Impact Management, which have been initiated by the International Finance Corporation and aim to assess the true impact that fund managers have. It actively promotes impact management and is an industry advocate of many impact initiatives and networks, such as the influential Global Impact Investing Network (GIIN).

Schroders completed the acquisition of a majority stake in BlueOrchard in 2019 while earlier this year, it also joining GIIN.

BlueOrchard has invested more than $8bn across more than 90 countries.

Green bonds represent a powerful opportunity to pursue positive environmental change, while also earning attractive fixed income returns.”