The Axa World Funds Planet Bonds fund, launched by Axa Investment Managers three days ago, will focus on "unlabelled" green corporate issues, as well as paper labelled as green, according to lead fund manager, Olivier Vietti.
Labelled green bonds are those that the issuers specify as green but other bonds may have broad environmental benefits which are not specifically labelled as 'green'.
Axa WF Planet Bonds has 85 holdings, of which 35 are labelled green, although they comprise about 55% of its value. Examples of labelled green holdings include issues by ABN Amro and the European Investment Bank.
The remaining holdings are bonds issued by companies judged by Axa's team of 12 responsible-investment (RI) experts to have "a high environmental impact", such as car parts maker Valeo.
Vietti told Environmental Finance, a sister publication of Insurance Asset Risk, that the fund looks beyond the $78bn labelled green bond universe so it can hold the paper of companies that have not issued labelled green bonds, but have an important role to play in the transition away from fossil fuels (EF, 11 November, Profile: Axa IM's new green bond fund).
Vietti said, "It makes sense to invest in small companies that have a role to play in the energy transition, for example car [part] suppliers that are too small to have labelled green bonds."
Whereas the green bond market is still dominated by AAA-rated multilateral development banks, investing in corporates should help to boost the fund's yield.
The fund's average coupon is 1.4%, its credit rating is A and the average maturity of the holdings is five years. The fund is unconstrained by a benchmark. It looks for issues of at least €300m ($323m) in size, although those of €500m are preferred.
The new fund, launched three weeks before the start of COP21 (the 2015 Paris Climate Conference), is run by Axa IM's global rates team in collaboration with the RI team.
The fund is a Luxembourg-domiciled SICAV (Société d'Investisement à Capital Variable, an EU collective investment scheme ) with both retail and institutional share classes, and is registered for distribution in France, the Netherlands, Sweden, Finland, Norway, Denmark, Austria, Belgium, Germany, Italy, Spain and the UK .
Andrea Rossi, CEO of Axa Investment Managers, said: "We believe that being a responsible asset manager is fundamental for sustainable, long-term investment success. As an official COP21 sponsor, the Axa Group has made strong commitments to help mitigate climate change, for instance by tripling its green investments by 2020."
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