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Fixed Income
Net Zero Global Bonds: Supporting enablers in the journey to a low-carbon economy
Andy Byfield, looks at how our Net Zero Global Bond Strategies aim to invest in companies that are driving towards a sustainable future.
The EU Sustainable Finance Disclosure Regulation (SFDR), introduced in March 2021, set out a classification system to improve the transparency of environmental, social and governance (ESG) factors in financial products.
The rules make it more difficult for financial firms to “greenwash” products or say they are ESG friendly or sustainable when they are not. Financial products are classed as either Article 6, Article 8 or Article 9 funds. An Article 6 classification does not have a sustainable investment objective. An Article 8 classification promotes environmental or social characteristics, while Article 9 has a sustainable investment objective.
“The SFDR is designed to help institutional and retail clients understand, compare, and monitor the sustainability characteristics of investment products by standardising sustainability disclosures,” says Maximillian Kufer, Head of ESG Client Strategy for EMEA and Global Private Markets at Invesco. “It’s intended to provide greater transparency on what criteria have been applied to products by categorising them, based on their credentials.”
“We recognise that clients have diverse needs when it comes to investing sustainably. An Article 6, 8 or 9 designation aims to provide clarity for investors by categorising funds according to their sustainability characteristics and therefore helping investors select funds that align with their sustainability and investment objectives.”
The classifications help investors understand the sustainability focus of the funds they are considering, so they can make informed decisions about investing in them.
Since adopting the SFDR back in March 2021, we have carried out a methodical review of our product range and where appropriate, classified in-scope products as Article 8 or Article 9.1
Invesco ASEAN Equity Fund
Invesco Asia Consumer Demand Fund
Invesco Asia Opportunities Equity Fund
Invesco Asian Equity Fund
Invesco China A-Share Quality Core Equity Fund
Invesco China A-Share Quant Equity Fund
Invesco China Focus Equity Fund
Invesco China Health Care Equity Fund
Invesco Continental European Equity Fund
Invesco Continental European Small Cap Equity Fund
Invesco Developed Small and Mid-Cap Equity Fund
Invesco Emerging Markets Equity Fund
Invesco Energy Transition Fund
Invesco Euro Equity Fund
Invesco Global Consumer Trends Fund
Invesco Global Equity Income Fund
Invesco Global Focus Equity Fund
Invesco Global Founders & Owners Fund
Invesco Global Small Cap Equity Fund
Invesco Gold & Special Minerals Fund
Invesco Greater China Equity Fund
Invesco India Equity Fund
Invesco Japanese Equity Advantage Fund
Invesco Metaverse Fund
Invesco Nippon Small/Mid Cap Equity Fund
Invesco Pacific Equity Fund
Invesco Pan European Equity Fund
Invesco Pan European Equity Income Fund
Invesco Pan European Focus Equity Fund
Invesco Pan European Small Cap Equity Fund
Invesco PRC Equity Fund
Invesco Responsible Global Real Assets Fund
Invesco Responsible Japanese Equity Value Discovery Fund
Invesco Social Progress Fund
Invesco Sustainable Eurozone Equity Fund
Invesco Sustainable Global Structured Equity Fund
Invesco Sustainable Pan European Structured Equity Fund
Invesco Sustainable US Structured Equity Fund
Invesco UK Equity Fund
Invesco Global High Yield Short Term Bond Fund
Invesco Global Investment Grade Corporate Bond Fund
Invesco Global Total Return (EUR) Bond Fund
Invesco India Bond Fund
Invesco Net Zero Global Investment Grade Corporate Bond Fund
Invesco Real Return (EUR) Bond Fund
Invesco Sterling Bond Fund
Invesco Sustainable China Bond Fund
Invesco Sustainable Global High Income Fund
Invesco Sustainable Multi-Sector Credit Fund
Invesco UK Investment Grade Bond Fund
Invesco US High Yield Bond Fund
Invesco US Investment Grade Corporate Bond Fund
Invesco USD Ultra-Short Term Debt Fund
Invesco AT1 Capital Bond UCITS ETF
Invesco Emerging Markets ESG Climate Paris Aligned UCITS ETF
Invesco Emerging Markets ESG Universal Screened UCITS ETF
Invesco EUR Corporate Bond ESG Multi-Factor UCITS ETF
Invesco EUR Corporate Bond ESG Short Duration Multi-Factor UCITS ETF
Invesco EUR Government and Related Green Transition UCITS ETF
Invesco EUR IG Corporate Bond ESG UCITS ETF
Invesco FTSE All Share ESG Climate UCITS ETF
Invesco GBP Corporate Bond ESG UCITS ETF
Invesco Global Clean Energy UCITS ETF
Invesco Global High Yield Corporate Bond ESG UCITS ETF
Invesco Hydrogen Economy UCITS ETF
Invesco MSCI EMU ESG Universal Screened UCITS ETF
Invesco MSCI Europe ESG Climate Paris Aligned UCITS ETF
Invesco MSCI Europe ESG Leaders Catholic Principles UCITS ETF
Invesco MSCI Europe ESG Universal Screened UCITS ETF
Invesco MSCI Europe Ex UK ESG Universal Screened UCITS ETF
Invesco MSCI Japan ESG Climate Paris Aligned UCITS ETF
Invesco MSCI Japan ESG Universal Screened UCITS ETF
Invesco MSCI Pacific Ex Japan ESG Universal Screened UCITS ETF
Invesco MSCI USA ESG Climate Paris Aligned UCITS ETF
Invesco MSCI USA ESG Universal Screened UCITS ETF
Invesco MSCI World ESG Climate Paris Aligned UCITS ETF
Invesco MSCI World ESG Universal Screened UCITS ETF
Invesco NASDAQ-100 ESG UCITS ETF
Invesco Quantitative Strategies ESG Global Equity Multi-Factor UCITS ETF
Invesco Quantitative Strategies Global Equity Low Volatility Low Carbon UCITS ETF
Invesco S&P 500 ESG UCITS ETF
Invesco S&P World Energy ESG UCITS ETF
Invesco S&P World Financials ESG UCITS ETF
Invesco S&P World Health Care ESG UCITS ETF
Invesco S&P World Information Technology ESG UCITS ETF
Invesco Solar Energy UCITS ETF
Invesco USD High Yield Corporate Bond ESG UCITS ETF
Invesco USD IG Corporate Bond ESG UCITS ETF
Invesco Wind Energy UCITS ETF
Invesco Environmental Climate Opportunities Bond Fund (UK)
Invesco Responsible Japanese Equity Value Discovery Fund (UK)
Invesco Summit Responsible 1 Fund (UK)
Invesco Summit Responsible 2 Fund (UK)
Invesco Summit Responsible 3 Fund (UK)
Invesco Summit Responsible 4 Fund (UK)
Invesco Summit Responsible 5 Fund (UK)
Invesco Sustainable UK Companies Fund (UK)
Invesco European Senior Loan ESG Fund
Invesco Global Senior Loan ESG Fund
Invesco US Senior Loan ESG Fund
Invesco Euro Liquidity Portfolio
Invesco Sterling Liquidity Portfolio
Invesco US Dollar Liquidity Portfolio
Invesco Net-Zero Global Buy and Maintain Credit 2020-2035 Fund
Invesco Net-Zero Global Buy and Maintain Credit 2030-2050 Fund
Article 8 funds are defined by the SFDR as “a fund which promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices”.
Managers of products must have clear information on how the environmental and social characteristics are met. If an index has been designated reference benchmark, there needs to be information on how the index is consistent with those characteristics. There also needs to be information as to where the methodology used for the calculation of the reference index can be found.
Exclusion strategies can also be used for Article 8 funds. Our exclusions framework for some of our Article 8 funds are:
UN Global Compact
International sanctions
Controversial weapons
Coal
Unconventional oil & gas
Tobacco
Others
*Additional exclusions may also apply to some of our other Article 8 and Article 9 fund range.
Article 9 funds are defined as “products that have sustainable investment as their objective, and which invest in economic activities that contribute to an environmental objective, as evidenced by the fact that the investee companies follow good governance practices”.
Managers of products are required to provide clear and accurate information to investors about their sustainable investment objective. If a fund has an index as a reference benchmark, there must be information on how it’s aligned with the sustainable investment objective and why and how this index differs from a broad market index. If there’s no index there needs to be an explanation on how the sustainable investment objective are attained.
The investee companies in these activities must follow good governance practices, such as sound environmental management, ethical business conduct and responsible corporate governance.
The SFDR is part of the broader European Union Sustainable finance Action Plan, which aims to mobilise capital towards sustainable investments and ensure that financial institutions and investors consider sustainability factors in their decision-making processes.
The rules impose mandatory ESG disclosures for financial market participants on how they integrate ESG into their products. It improves transparency of sustainability related products and creates a level playing field for investors to compare products and understand the impact of their investment decisions.
Sustainable finance refers to financial activities and practices that integrate ESG factors into investment decisions, lending practices and other financial services. It seeks to align financial activities with sustainability objectives and promote the long-term well-being of both the economy and the environment.
The objective of sustainable finance is to promote a shift towards a more sustainable and resilient global economy. It encourages financial institutions, investors and businesses to consider not only financial returns but also the broader environmental and social impacts of their activities. By integrating sustainability considerations into financial decision-making, sustainable finance aims to drive positive change and contribute to a more sustainable future.
Sustainable investing refers to an investment approach that considers ESG factors in addition to financial returns. Sustainable investing seeks to generate positive social or environmental impact alongside financial performance.
Sustainable investors evaluate companies and investment opportunities based on their performance and practices related to environmental sustainability, social responsibility, and corporate governance. Factors they consider include carbon emissions, labour practices, board diversity, community engagement and ethical conduct.
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1At Invesco we continuously monitor any applicable sanctions, including those imposed by the UN, US, EU and UK. These sanctions may preclude investments in the securities of various governments/regimes/entities and as such will be included in our compliance guidelines and workflows designed to ensure compliance with such sanctions. The wording of international sanctions is something that we pay particular attention to as there are occasions where sanctions can exist in limited form, for example allowing investments in the secondary market.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Data as at 12.06.2023, unless otherwise stated.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Views and opinions are based on current market conditions and are subject to change.