Preparing Buy & Maintain credit portfolios for net zero: Start now but be thoughtful

As more defined benefit funds move down the de-risking path and require liability-aware cashflows, the allocations to credit, and Buy & Maintain, have increased. Given the nature of the strategy is to hold bonds to maturity, it is therefore necessary that these products are not only climate aware but are also structured to aid clients in their transition to net zero.

While measuring and tracking climate risk presents a continued challenge, there has been movement in the right direction and beginning with a set of baseline metrics can help track progress and maintain momentum over time. We believe clients who spend the time now to evaluate and engage with managers will be better positioned in the long run to achieve critical climate transition goals. As an example of what can be done, we have been working with a manager to incorporate decarbonisation in a widely-used Buy & Maintain fund and improve its alignment with the Paris Agreement.

In this piece, we share how clients can begin engaging with their Buy & Maintain managers and offer a case study of a recent mandate we worked with a manager to create.