World Bank Green Bonds (2024)

The Nikko AM Global Green Bond Strategy aims to provide
capital to…

Our Philosophy

Our world is facing a global environmental crisis, one with such magnitude that it will affect each and every one of us. We believe that green bonds have a vital role to play in mitigating the severity of the global environmental crisis by supporting positive climate change solutions. Our aim is to address climate change by focusing on net zero and energy transition as well as promoting nature conservation, protecting ecosystems, and preventing biodiversity loss. By balancing fundamental and quantitative analysis, we provide a more comprehensive and sophisticated approach to investing in green bonds, ensuring that portfolios are both sustainable and profitable. This approach results in the strategy having the following key features:

Key characteristics

Style: Active Fundamental and Quantitative analysis

Universe: SSA Green Bonds, Corporate Green Bonds, Social, Sustainability & Sustainability Linked Bonds

Benchmark: iBoxx Global Green, Social and Sustainability Bond Index

Target return: Outperform the benchmark by 1% gross over a rolling 3-5 years

Tracking Error Target: 150 -300bps

Duration Range: +/- 2Yrs

UCITS Vehicle Available: SFDR Article 9 Fund

Sustainability focussed themes

Our commitment to sustainability is the driving force behind our investment strategy. In line with this, our portfolio prioritises three key areas when considering a bond to include in our investment portfolio:

Proprietary bottom-up sustainability assessment

Our unique bottom-up review process applies to every holding in the portfolio. This distinctive approach combines sustainable assessments from three different lenses:

1. The issuer’s sustainability strategy
2. The pre-issuance bond framework
3. The post-issuance allocation and impact report

Through this process, we gather and review both third-party data and source materials to ensure consistency between the issuer’s sustainability strategy and the issuance of a labelled bond but also that the bond itself follows best disclosure standards with transparent and impactful use of proceeds. This qualitative review process is taking place before investing and, if concerns are identified, can lead to the decision not to invest or to conduct enhanced due diligence, through engagement.

Investment process

Our investment process is designed to integrate sustainability considerations into our investment decisions whilst integrating top-down and bottom-up approaches, leveraging both quantitative analysis and qualitative team input to construct a well-diversified and sustainable green bond portfolio. This is done in conjunction with ensuring that we invest in bonds that align with our commitment to sustainable development and contribute to positive environmental and social outcomes.

Our Team

Our strategy is managed by Steve Williams and Holger Mertens who are supported by a team of portfolio management and research professionals including a dedicated team of ESG Specialists.

Our Edge

Green Bond Pioneers

Our extensive experience and expertise in the green bond space makes us a leader in this field. Nikko AM played a crucial role in creating the world’s first green bond fund in conjunction with the World Bank in 2010. The core investment team has extensive experience in this space and the team has directly engaged with issuers in the structuring and issuance of green bonds for over a decade. With our dedication to sustainability and innovation, we are well-positioned to help shape the future of the green bond market and to support positive environmental change.

Distinctive investment approach

Nikko AM's core team brings a wealth of expertise and a distinctive investment approach to the table. The backbone of our investment process is a fundamentally focused strategy supported by quantitative tools, which enables the team to identify the most attractive investment opportunities in the market. The investment approach applied is characterised by the harmony between fundamental and quantitative analysis, which the team believes is crucial to successfully identifying and capitalising on market opportunities. By balancing these two lenses of analysis, we can provide a more comprehensive and sophisticated approach to investing in green bonds, ensuring that their clients' portfolios are both sustainable and profitable.

Proprietary Bottom-up Sustainability assessment

The team has developed a unique bottom-up review process that applies to every holding in the portfolio. This qualitative review process is taking place before investing and, if concerns are identified, can lead to the decision not to invest or to conduct enhanced due diligence, through engagement. Through this process, we ensure consistency between the issuer’s sustainability strategy and the issuance of a labelled bond and also that the bond follows best disclosure standards with transparent and impactful use of proceeds.

Unique decision making process

Independent views collated into a team-wide survey and assessed against market consensus. This ensures that investment decisions are made based on a wide range of opinions, providing a more robust and nuanced approach to portfolio management.

The Nikko AM Global Green Bond Strategy in short

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