Evli Green Corporate Bond

Long-term fixed income fund that invests in European green corporate bonds

NAV
02.12.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
81.871 -13.11 -13.35 - - -5.88
NAV
02.12.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
87.030 -13.11 -13.35 - - -5.88
NAV
02.12.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
87.732 -12.83 -13.05 - - -5.55

Risk

3/7

Morningstar

0/5

Recommended Investment Horizon

at least 3 years

Administrative fees

0.75 % p.a.

Suitable for investors

  • who wish to improve the returns of their fixed income investments with only a moderate increase in the level of risk
  • who wish through investing to support projects that are beneficial for the environment and promote the achievement of the sustainable development goals
  • who wish to benefit from Evli’s experience in European corporate bond markets
  • who want to invest responsibly and take into account not only economic analysis but also environmental, social and good governance (ESG) factors.

 


Invest

min. 1 000 €

Investment Policy 

Evli Green Corporate Bond Fund is a long-term corporate bond fund that invests primarily in euro-denominated bonds issued by European companies and banks. The fund's investment policy complies with Evli's policies for responsible investment. The fund excludes from its investments in addition to companies manufacturing controversial weapons and tobacco, companies manufacturing alcohol, gambling, adult entertainment, weapons and fossil fuels (mining and extraction). The purpose is to invest in assets that, based on a sustainability analysis, are expected to have a positive impact on the environment or society or on the achievement of the UN Sustainable Development Goals. Such assets include, for example, green bonds.

The investments will be made in bonds with both higher (investment grade) and lower (high yield) credit ratings. The investments' credit rating will be on average at least BBB- or a classification with a corresponding risk level. Moreover, a maximum of 20% of the fund's assets may be invested in investments with no official credit rating.

 

The portfolio is managed by

Juhamatti Pukka

Juhamatti Pukka

Portfolio Manager

Noora Lakkonen

ESG Analyst

Investment Objective and Risks

The aim is to achieve a return that, in the long term, exceeds the benchmark return. The expected return and risk of Evli Green Corporate Bond are higher than those of a fund that invests solely in government bonds.

The credit risk arising from individual issuers is reduced by diversifying the investments among dozens of different issuers. The average repayment term (duration) of the fund's fixed income investments may be ± 3 years compared to the interest rate risk of the benchmark index.

The fund’s investments carry a credit risk

Credit risk originates from a bond issuer’s ability to repay the bond’s coupons and capital on the maturity date. In the fund’s investments, the default risk arising from an individual issuer is reduced by diversifying the investments among various issuers. The risk premium (credit margin) required by investors varies during the bonds’ exercise period according to the market conditions and factors related to individual issuers. As the credit risk grows, the values of the bonds in the portfolio decrease and vice versa. Poorer credit-rated High Yield bonds, in particular, carry a significant credit risk.

The fund’s value is affected by interest rate risk

A decrease in interest rates raises the value of the fund, while an increase reduces the value of the fund. Interest rate risk may be measured with the average remaining exercise period (duration). Interest rate risk indicates how sensitive the value of the fund is to changes in interest rates. Long-term fixed income funds are much more sensitive to interest rate movements than money market funds. The value of the fund may fluctuate heavily if there are substantial changes in interest rates. 

Monthly review

31.10.2022

Corporate bonds held up well in October despite rising inflation, central bank tightening and rising recession worries. The overall yield level of the corporate bond market is so high though, that in the absence of any major negative surprises, the carry return is translated into good total returns. The German 2- and 5-year yields rose by 18 and 4 bps, respectively. The IG market tightened by 5 and HY by 36 bps.

The fund total return in October was -0.21%, beating the benchmark by 0.34%. Outperformance was driven by an underweight and selection in Real Estate and overweight in Automotive. The ongoing Q3 reporting season has been surprisingly strong and in general the fund’s issuers have posted stronger than expected results, keeping profitability and balance sheets strong. A weakening economy will take a toll on profitability sooner or later, but the market already prices in a harsh recession and long-lasting weaker corporate profitability, lowering the risk of downside surprises.

Fund facts

Type of fund European corporate bond fund (UCITS)
Investment activity began 17.08.2020
Benchmark index

Bloomberg Barclays MSCI Euro Corporate Green Bond 5% Capped Index

Profit distribution Fund-units are divided into A and B units. Profit share of at least 3% is distributed on A units annually.

Sustainability-related disclosures

Financial product’s sustainability information in accordance with EU Sustainable Finance Disclosure Regulation (SFDR) 2019/2088 (sustainability‐related disclosures in the financial services sector). This is a financial product in accordance with Article 9 of the SFDR.

Publication date: December 1, 2022
Legal Entity Identifier: 743700TUHVU5NOQPXV31

a) Summary

The fund’s objective is to make sustainable investments in a way that achieves a positive and measurable social and environmental impact. The fund promotes climate change mitigation by making sustainable investments, and by engaging with companies and excluding certain industries, for example. The fund also invests in environmentally sustainable economic activities that meet the criteria of the EU Taxonomy Regulation. The fund may also invest in transitional and enabling economic activities. At least 5 percent of the fund’s investments are made in environmentally sustainable economic activities that are aligned with EU Taxonomy Regulation.

In addition, the fund promotes the mitigation of climate change by complying with Evli’s climate targets: the fund’s carbon footprint and emission indicators are measured and monitored, and a regular scenario analysis is conducted on the fund to monitor the attainment of Evli’s general climate targets. Evli’s goal is to achieve carbon neutrality by 2050 at the latest, and it has set an interim target of a 50 percent reduction in indirect emissions from all investments by 2030, provided that this is possible in the investment environment. The comparison year is 2019. The fund-specific share of the emission reduction target may vary between funds.

The fund invests in corporate bonds that seek environmentally and/or socially positive goals and the attainment of the UN’s Sustainable Development Goals. These assets include green bonds. Before an investment decision is made, the corporate bond’s compliance with the International Capital Markets Association’s principles on green bonds and its suitability for the issuer’s responsibility strategy are verified. In addition to using green corporate bonds as a reference, the issuer’s responsibility is evaluated on the basis of Evli’s Principles for Responsible Investment, which describe the approach to ESG analysis and exclusion.

The fund’s target companies are analyzed before an investment decision is made and at regular intervals during the investment period with regard to environmental, social and corporate governance matters, or ESG factors. ESG factors are integrated into the analysis of target companies and their selection for investment by the fund. In addition, the projects described in the target company’s green bond framework, to which the assets raised by the bond can be allocated, are analyzed and the framework’s alignment with the company’s responsibility objectives and strategy is ensured. An assessment of the quality of corporate governance is an important part of the assessment of potential investments. Good governance refers in particular to effective management structures, employee relations, staff remuneration and tax compliance.

The fund does not make investments that would cause significant harm to other environmental or social objectives. The fund observes Evli’s Principles for Responsible Investment and its Climate Change Principles and aims to invest in companies with a good responsibility rating. The principal adverse impacts (PAI indicators) on sustainability factors are taken into account in accordance with Evli’s Principles for Responsible Investment and Climate Change Principles. Target companies are required to comply with the OECD Principles for Multinational Enterprises, the UN Global Compact and the UN Guiding Principles on Business and Human Rights. Evli regularly monitors observance of the principles by the target companies and can either start engaging with a company or exclude it from investments if violations of the principles are revealed in monitoring. The fund may engage with the target companies as part of the promotion of environmental and social characteristics. Evli’s Responsible Investment Policy and Corporate Governance Principles set the framework for Evli’s engagement and conduct in the event of perceived breaches of the Code.

The attainment of the fund’s sustainable investment objective is measured and reported with specific indicators that are related to financed projects and their effectiveness. The sustainability indicators are the amount of CO2 emissions avoided, the amount of renewable energy production and the amount of renewable energy capacity increase in the fund. In addition, the achievement of the sustainable investment objective is monitored through the target companies’ carbon intensity trend and commitment to emission reduction targets, as well as the number of target companies that have not committed serious norm violations.

Evli has built an internal ESG database to monitor sustainability indicators. Data is also collected from issuers' reports. The data from external providers is not verified by a third party and the completeness of the data is reported at the same time. The completeness of the data does not affect compliance with the above principles.

No benchmark index has been designated for the fund to measure the achievement of the sustainable investment objective. The achievement of the sustainable investment objective is measured by the sustainability indicators described above.

b) No significant harm to the sustainable investment objective

The fund does not make investments that would cause significant harm to other environmental or social objectives. The fund observes Evli’s Principles for Responsible Investment and its Climate Change Principles and aims to invest in companies with a good responsibility rating.

The principal adverse impacts (PAI indicators) on sustainability factors are taken into account in accordance with Evli’s Principles for Responsible Investment and Climate Change Principles. The PAI indicators are considered through an internal process based on Evli’s Principles for Responsible Investment. An internal PAI tool has been built based on data from an external service provider to view PAI indicators relevant to the investment target. Evli’s Principles for Responsible Investment are asset class-specific and cover all Evli funds. Evli’s Principles for Responsible Investment and Climate Change Principles define industry-specific exclusion limits and the process for dealing with any identified norm violations.

Target companies are required to comply with the OECD Principles for Multinational Enterprises, the UN Global Compact and the UN Guiding Principles on Business and Human Rights. Evli regularly monitors observance of the principles by the target companies and can either start engaging with a company or exclude it from investments if violations of the principles are revealed in monitoring.

c) The financial product’s sustainable investment objective

The fund’s objective is to make sustainable investments in a way that achieves a positive and measurable social and environmental impact. The fund promotes climate change mitigation as part of the promotion of characteristics associated with the environment by making sustainable investments, and by engaging with companies and excluding certain industries, for example. The fund also invests in environmentally sustainable economic activities that meet the criteria of the EU Taxonomy Regulation. The fund may also invest in transitional and enabling economic activities. At least 5 percent of the fund’s investments are made in environmentally sustainable economic activities that are aligned with the EU Taxonomy.

d) Investment strategy

The fund invests in corporate bonds that seek environmentally and/or socially positive goals and the attainment of the UN’s Sustainable Development Goals. These assets include green bonds. Before an investment decision is made, the corporate bond’s compliance with the International Capital Markets Association’s principles on green bonds and its suitability for the issuer’s responsibility strategy are verified. In addition to using green corporate bonds as a reference, the issuer’s responsibility is evaluated on the basis of Evli’s Principles for Responsible Investment, which describe the approach to ESG analysis and exclusion.

The fund’s target companies are analyzed before an investment decision is made and at regular intervals during the investment period with regard to environmental, social and corporate governance matters, or ESG factors. ESG factors are integrated into the analysis of target companies and their selection for investment by the fund. Evli has built an internal ESG database based on data produced by external service providers, which it uses to monitor ESG factors.

Evli’s goal is to achieve carbon neutrality by 2050 at the latest, and it has set an interim target of a 50 percent reduction in indirect emissions from all investments by 2030, provided that this is possible in the investment environment. The comparison year is 2019. The fund-specific share of the emission reduction target may vary between funds. The attainment of the climate targets will be measured using data from external service providers to monitor the fund’s carbon footprint and intensity, the degree of low-carbon transition, a scenario analysis in relation to the target of limiting global warming to 1.5 degrees Celsius and the warming ratio associated with the fund.

An assessment of the quality of corporate governance is an important part of the assessment of potential investments. Good governance refers in particular to effective management structures, employee relations, staff remuneration and tax compliance.

Evli’s ownership control principles state that the companies it invests in must engage in good governance by complying with the Finnish Corporate Governance Code issued by the Securities Market Association, for example, or corresponding foreign guidelines, which often impose a partial framework on the remuneration models of the invested companies. In addition, Evli’s Responsible Investment Team analyzes the fund’s investments every three months for any breaches of norms (UN Global Compact and OECD’s guidelines for multinational companies). The OECD’s guidelines for multinational companies also cover disputes related to taxation. Consequently, such disputes may lead to the exclusion of an investment instrument.

e) Proportions of investments

At least 5 percent of the fund’s investments are made in environmentally sustainable economic activities that are aligned with the EU Taxonomy. To the extent that environmentally sustainable investments are not environmentally sustainable under the Taxonomy Regulation, they are other environmentally sustainable investments. The fund can also make socially sustainable investments.

The fund may hold other investments for hedging or liquidity purposes that do not meet the definition of a sustainable investment.

f) Monitoring the sustainable investment objective

The attainment of the fund’s sustainable investment objective is measured and reported with specific indicators that are related to financed projects and their effectiveness. The sustainability indicators are the amount of CO2 emissions avoided, the amount of renewable energy production and the amount of renewable energy capacity increase in the fund. In addition, the achievement of the sustainable investment objective is monitored through the target companies’ carbon intensity trend and commitment to emission reduction targets, as well as the number of target companies that have not committed serious norm violations.

Evli has built an internal ESG database to monitor sustainability indicators. Data is also collected from issuers' reports. In addition, the Responsible Investment Team analyzes norm violation cases in accordance with the process set out in the Principles for Responsible Investment.

g) Methods

The sustainability characteristics of the financial product are monitored and reported using the sustainability indicators mentioned above.

h) Data sources and processing

Evli has built an internal database based on data provided by external service providers, which is used to monitor and report on the sustainability characteristics of the fund and the adverse effects of investment decisions. The data from external providers is not verified by a third party and the completeness of the data is reported at the same time. Data is also collected from issuers’ reports.

i) Limitations of methods and data

The achievement of the fund’s sustainability characteristics is reported annually through the sustainability indicators mentioned above, in conjunction with which the completeness of the data from the target companies is also reported. All active investments of the fund also comply with Evli’s Principles for Responsible Investment and Climate Change Principles. The completeness of the data does not affect compliance with the above principles.

j) Due diligence

The fund’s target companies are analyzed before an investment decision is made and at regular intervals during the investment period with regard to environmental, social and corporate governance matters, or ESG factors. ESG factors are integrated into the analysis of target companies and their selection for investment by the fund. In addition, the projects described in the target company’s green bond framework, to which the assets raised by the bond can be allocated, are analyzed and the framework’s alignment with the company’s responsibility objectives and strategy is ensured. Evli regularly monitors its active investments and seeks to influence the companies’ practices. If a company violates the principles of the UN Global Compact, the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises or Evli’s Climate Change Principles, Evli will either seek to influence the company’s actions through engaging with it or exclude it from its investments. The methods are based on data provided by an external service provider, which is not verified by a third party.

k) Engagement policies

The financial product can be used to engage with the target companies as part of the promotion of environmental and social characteristics. Evli’s Responsible Investment Policy and Corporate Governance Principles set the framework for Evli’s engagement and conduct in the event of perceived breaches of the Code.

l) Achieving the sustainable investment objective

No benchmark index has been designated for the fund to measure the achievement of the sustainable investment objective. The achievement of the sustainable investment objective is measured by the sustainability indicators described above.

Downloadable files

Invest

min. 1 000 €