Article

Net Zero Global Bonds: Supporting enablers in the journey to a low-carbon economy

20 May 2024
Andy Byfield
Andy Byfield
Senior Client Portfolio Manager
Net Zero Global Bonds: Supporting enablers in the journey to a low-carbon economy
Key takeaways
1

Our Net Zero Global Bond strategies not only aim to mitigate greenhouse gas (GHG) emissions but also strive to foster a positive impact on the real economy. A primary focus is on companies in hard-to-abate sectors.

2

Neste are a world leading producer of sustainable aviation fuel (SAF), which can reduce GHG emissions by up to 80% over the fuel's life cycle. 

3

Maersk stands out as a pioneer and leader, their dedication to sustainability is evident in its investment in clean technologies and renewable sources across its value chain.

In the pursuit of a more sustainable future, our Net Zero Global Bond strategies not only aim to mitigate greenhouse gas (GHG) emissions but also strive to foster a positive impact on the real economy. Built on the belief that achieving the goal of net zero should not rely on excluding certain sectors, a primary focus is on companies within a hard-to-abate sectors, such as aviation and oil & gas. Recognising the critical role these sectors play in global emissions, our strategies revolve around identifying opportunities and companies that serve as enablers in the journey toward net zero attainment, rather than excluding them.

Neste – reducing aviation’s carbon footprint

Among the standout enablers in this space is Neste, the world's leading sustainable aviation fuel (SAF) producer. Neste's innovative approach involves the production of SAF from sustainably sourced renewable waste and residues, including used cooking oil and animal fat waste. This process results in SAF that can reduce GHG emissions by up to 80% over the fuel's life cycle, compared to conventional fossil jet fuel — a significant contribution to emissions reduction in the aviation sector.

Looking ahead, Neste is poised to further bolster its production capacity, with plans to increase total production capacity of renewable products to 6.8 million tons by the end of 2026. This expansion not only signifies the company's dedication to meeting growing demand for sustainable alternatives but also reinforces its pivotal role as a key player in the transition to a low-carbon economy.

Maersk – sailing towards Net Zero

Separately, as economies strive to reach net zero, the logistics and ocean shipping sectors have emerged as critical areas for reducing greenhouse gas (GHG) emissions. In this landscape, Maersk stands out as a pioneer and leader, spearheading efforts to develop and implement low-emission solutions across its value chain.

At the core of Maersk's approach is a commitment to collaboration and innovation. Maersk's dedication to sustainability is evident in its investment in clean technologies and renewable sources. The company is a frontrunner in the adoption of green methanol as a marine fuel, with the world's first container ship capable of sailing on green methanol, the Laura Mærsk, marking a significant milestone in this journey upon its arrival in 2023. This pioneering vessel showcases Maersk's commitment to embracing innovative solutions that reduce GHG emissions while ensuring operational efficiency.

Moving forward, Maersk is poised to further expand its fleet of low-emission vessels. With 18 large container vessels (16,000-17,000 TEU capacity) on order, scheduled for arrival in 2024-2025, and an additional 6 vessels (9,000 TEU capacity) slated for delivery in 2026-2027, Maersk is set to significantly increase its capacity for sustainable shipping. These investments underscore Maersk's long-term vision and proactive approach to navigating the transition toward a low-carbon future.

Furthermore, Maersk's commitment to sustainability extends beyond its own operations to encompass its entire value chain. By piloting low-GHG emission solutions for airfreight, landside transportation, and logistics facilities, Maersk is driving systemic change and encouraging industry-wide adoption of best practices in emissions reduction.

Maersk's leadership in decarbonising global logistics exemplifies the pivotal role that companies can play in addressing the goal of net zero.

Neste and Maersk demonstrate climate transition and net zero leadership but also offer tangible solutions for decarbonising hard-to-abate sector. As we navigate the path to net zero, investment in innovative companies such as these will be instrumental in realising our collective vision of a more sustainable future. By leveraging a forward-looking approach and rigorous due diligence, our Net Zero global bond strategies aim to catalyse transformative change while generating sustainable returns for investors. 

Lyndon Mann, Portfolio Manager’s view:

Neste and Maersk are held across our Net Zero Global Bond strategies based on their peer leading credentials, whilst fundamentally we also like the names. Indeed, Neste has delivered 5% of annualised decarbonisation since making its commitment in 20191, which has positively contributed to the strategies goal of achieving Net Zero by 2050 or sooner. Meanwhile, although Maersk’s absolute carbon emissions have remained flat since they made their commitment in 2020, we believe they remain on track to meet their 70% reduction goal by 2030 as their fleet of low emission vessels comes online over the coming years.

Related insights

Footnotes

  • 1Annual Report 2023 Sustainability, Neste 

Investment risks

  • 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.  

    Invesco Net Zero Global Investment Grade Corporate Bond Fund

    For complete information on risks, refer to the legal documents. Debt instruments are exposed to credit risk which is the ability of the borrower to repay the interest and capital on the redemption date. Changes in interest rates will result in fluctuations in the value of the fund. The fund uses derivatives (complex instruments) for investment purposes, which may result in the fund being significantly leveraged and may result in large fluctuations in the value of the fund. The fund may invest in certain securities listed in China which can involve significant regulatory constraints that may affect the liquidity and/or the investment performance of the fund. As this fund is invested in a particular sector, you should be prepared to accept greater fluctuations in the value of the fund than for a fund with a broader investment mandate. The fund may invest in contingent convertible bonds which may result in significant risk of capital loss based on certain trigger events. The lack of common standards may result in different approaches to setting and achieving ESG objectives. In addition, the respect of the ESG criteria may cause the fund to forego certain investment opportunities.

    Invesco Global Buy and Maintain Credit Strategy

    The strategy will invest in derivatives (complex instruments) which will result in leverage and may result in large fluctuations in value. Debt instruments are exposed to credit risk which is the ability of the borrower to repay the interest and capital on the redemption date. Investments in debt instruments which are of lower credit quality may result in large fluctuations in value. Changes in interest rates will result in fluctuations in value. 

Important information

  • Data as at 09/05/2024 unless stated otherwise. Views and opinions are based on current market conditions and are subject to change.

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