Paris-based Edmond de Rothschild Asset Management steps up its commitment to combat climate change.

As investors become increasingly concerned about climate change, Edmond de Rothschild Asset Management has just launched a climate-focused emerging market bond fund to tackle global warming.

The Edmond de Rothschild Fund EM Climate Bonds is classified under Article 9 of the EU’s Sustainable Finance Regulation (SFDR), investing primarily in green bonds in emerging markets. The firm believes that they are an effective tool for directing financing towards clean energy projects. Focused on high quality corporate bonds, the firm said that the fund provides investors with an opportunity for being at the forefront of one of the fastest growing fixed income segments.

“At the United Nations Climate Change Conference (COP27), several agencies called for urgent action to help the energy transition in emerging markets. They have the technology and the know-how but they have a funding problem to achieve their targets,” Daniela Savoia, emerging debt fund manager at Edmond de Rothschild AM, said this week. She believes that action must be taken through green and sustainable funds.

The asset manager highlighted how emerging markets are the fastest growing energy consumer globally. Therefore, investments in the region are essential and have the potential to be impactful. In Savoia’s view, these investments can enable a straightforward transition to efficient, low-carbon energy models. For instance, by reducing coal use in favour of renewable energies, electrifying transport on a large scale or developing sustainable farming methods. Savoia believes that the carbon emission targets set by the Paris Agreement on climate change cannot be reached without involving emerging markets. India’s energy consumption, for instance, will increase significantly and a global approach is needed to tackle climate change, Savoia said. “It is also a good opportunity for investors in an underinvested space, with higher yields, lower volatility and more impact,” Savoia added.

The strategy is in line with the objective of the Paris agreement to limit the rise in temperature to below 2.0°C and activates several United Nations Sustainable Development Goals, such as affordable and clean energy, the firm said. It is also part of the existing emerging market platform at Edmond de Rothschild AM, which consists of a team of fixed income portfolio managers who exclude coal and oil and gas sectors, on top of the lowest 20 per cent ESG ratings and largest CO2 emitters. Eighty per cent of the firm's assets under management come under Article 8 of the SFDR.

Nikko Asset Management has also recently expanded the capability of its green bond to increase impact opportunities across biodiversity and climate change. See more here.