Evli Green Corporate Bond

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

NAV
22.09.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
80.521 -14.54 -15.71 - - -7.14
NAV
22.09.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
85.595 -14.54 -15.71 - - -7.14
NAV
22.09.2022
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
86.227 -14.32 -15.41 - - -6.82

Risk

3/7

Morningstar

0/5

Recommended Investment Horizon

3 years or more

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

31.08.2022

August was like July, a month with a total U-turn in capital markets. The positive tone and sentiment experienced in July suddenly vaporized in mid-August and markets tumbled. In particular, the devastating surge in energy prices was a toxic ingredient to the economic and inflation outlook – and added pressure on the ECB to deliver a sizeable rate hike in the upcoming September meeting. Many economists expect a 75-bp hike and as a result, money market rates rose rapidly. In longer rates, the German 2-year yield surged from 0.28% to 1.20%, and the 10-year rate almost doubled to 1.54%.

The fund suffered from both a rise in rates and widening of spreads, netting -3.24% in August and outperforming the benchmark index’s -4.04%. Outperformance was driven especially by an underweight in duration and selection within the real estate sector. On the other hand, an overweight in credit risk weighed on relative performance in August.

Investors were expecting autumn to be busy in the primary market, but in the current turmoil, it is safe to assume most new issues will be pushed to the background, awaiting calmer market conditions. For the short maturity investor, it’s still of utmost importance to keep eyes on the horizon and focus on credit fundamentals, which continued to strengthen during a surprisingly strong Q2 in European and Nordic markets.

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.

Responsibility and consideration of sustainability factors

Sustainability information in accordance with Articles 6 and 9 of the EU SFDR regulation 2019/2088 (sustainability‐related disclosures in the financial services sector).

The fund's objective is to make sustainable investments in accordance with Article 9 of the SFDR.

Sustainability risks are taken into account in investment decisions

When building and monitoring the fund’s investment portfolio, traditional financial and other key indicators, such as risk and valuation indicators, and also sustainability risks are taken into account in investment decisions. In addition to the analysis made in connection with investment decisions, the sustainability risk is managed with the exclusion of certain sectors and/or companies. When realized, material sustainability risks can affect the financial performance of the fund’s investment instruments, and therefore the fund’s return.

Excluding certain sectors and/or financial instruments from investment is expected to reduce the fund’s sustainability risk. It can, however, increase the fund’s concentration risk. A potential increase in concentration risk, taken in isolation, may lead to greater volatility and increase the risk of loss.

Making sustainable investments is the goal

The fund's objective is to make sustainable investments in a way that achieves a positive and measurable social and environmental impact.

The fund invests 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. These assets include green bonds.

The fund's sustainable investment strategy is complemented by sector-specific screening. It excludes companies in the tobacco and fossil fuels sectors, for example, where a significant part of companies’ revenue comes from certain activities that are deemed to be detrimental to the environment and/or society.

The fund does not make investments that would cause significant harm to other environmental or social objectives.

The fund may temporarily (e.g. for liquidity or hedging) invest in instruments that do not meet sustainability criteria. Such investments comply with requirement of minimum safeguards.

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 fund reports on the attainment of its sustainable investment objective in accordance with the SFDR in the fund’s annual report. In addition to reporting in accordance with the SFDR, the fund also publishes a separate allocation and impact report, which is available at the address https://www.evli.com/en/products-and-services/funds/funds/esg-reports

Good governance policy

Good governance is required of the companies invested in by the fund. An assessment of the quality of corporate governance is an important part of the assessment of potential investments. Evli’s ownership control principles require that the companies invested in practice good governance, such as defined by the corporate governance code of the Securities Market Association, for example, or corresponding foreign guidelines. In addition, Evli’s ownership control principles also establish a partial framework for the remuneration models used by the companies that the fund invests in, and Evli’s Responsible Investment Team analyses the fund's investments every three months for any breaches of the UN Global Compact’s norms. The tax analysis of investments primarily assesses disputes related to the company's taxation. A major tax dispute can lead to a negative investment decision, which means that the fund will not invest in the company.

EU Taxonomy information

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 sectors, 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 meet the criteria of the EU Taxonomy Regulation. Information on an investment’s compliance with the EU Taxonomy Regulation is obtained from issuers and from third parties who report information. In its annual report, the fund reports the actual proportion of investments that comply with the Taxonomy Regulation, which may be greater than the minimum required.

ESG strategy

Various factors related to a company and its sector are taken into account when making investment decisions. ESG factors are a key part of risk analysis and investment decisions. Evli's Principles for Responsible Investment and Climate Change Principles establish a framework for its investment activities. Portfolio managers carry out analyses of the companies and their sectors and their ESG-associated risks and opportunities. The Responsible Investment Team supports the portfolio managers in their work, and Evli's Responsible Investment Steering Group makes decisions on the framework of responsible investment. With Evli’s ESG database portfolio managers have easy access to corporate responsibility data when making investment decisions and conducting analyses.

Our responsibility reporting comprises fund ESG reports, customer-specific ESG reports, and the Responsible Investment Annual Report. In addition, the fund publishes a regular (at least once a year) report on the use of assets and the expected impact of the projects it has funded.  Evli also reports on attaining the sustainable investment objective in accordance with the SFDR in the funds’ annual report.

The Principles for Responsible Investment, the Climate Change Principles and the exclusion consensus criteria apply to all direct investments made by the fund.

The fund can use derivatives or other strategies occasionally, regularly, extensively or not at all. Its key investor information document (KIID) includes information on how often and for what purpose derivatives are used. Such investments are not covered by ESG requirements.

Evli’s Principles for Responsible Investment and exclusion

The fund invests in corporate bonds that seek environmentally and/or socially positive goals and the attainment of the UN's Sustainable Development Goals. 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 our approach to ESG analysis and exclusion. The purpose of the analysis is to understand the ESG risks associated with the company and any significant unresolved ESG issues that could prevent investment in the company.

Evli's Principles for Responsible Investment define the basic standards for norm-based screening and exclusion of companies. Investments are regularly monitored with respect to the UN Global Compact principles. If the target company is found to violate the principles related to human rights, labor standards or the environment or actions against corruption as defined in the UN Global Compact initiative, Evli will engage with the company or exclude it from investments. On the basis of regular monitoring, Evli's Responsible Investment Team will take the necessary measures with respect to companies that are suspected of having violated international laws and regulations. Such companies can either be excluded directly or Evli can engage with them. If dialogue with a company fails or is deemed to be unhelpful, the company may be added to the exclusion list.

In accordance with Evli’s general exclusion principles, manufacturers of controversial weapons and firearms (landmines, cluster munitions, nuclear weapons, depleted uranium, chemical weapons and biological weapons) with a 0 percent revenue threshold, as well as tobacco manufacturers and producers of adult entertainment and companies involved in controversial lending (including so called pay-day lenders) with a 5 percent revenue threshold are excluded from the fund. In accordance with Evli’s Climate Change Principles, the fund avoids investment in companies that raise at least 30 percent of their revenue from the mining of thermal coal, its use in energy production or the extraction of oil sands. This exclusion may be waived if the company has a clear plan to change its operations. In addition, companies producing peat for energy production are excluded.

Under its own exclusion principles, the fund also excludes alcohol and weapons manufacturers, gambling companies and fossil fuel (mining, extracting and drilling) manufacturers from its investments.

Benchmark index and fund responsibility profile

The fund’s return benchmark index is the Bloomberg Barclays MSCI Euro Corporate Green Bond 5% Capped Index.  In order to be accepted in the index, the bond must pass an assessment by MSCI, on the basis of which it can be classified as a green bond. This requires that the bond meets the criteria set by MSCI regarding asset use, project evaluation and selection, management of assets and reporting. With respect to asset use, the requirement is that the assets collected with the bond are used for projects that promote sustainability goals related to the climate or to the environment (e.g. sustainable water use, pollution prevention and control, green building). This index is different from a general market index because only green bonds are selected into it. Further information on the methods used by the benchmark index is available at https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXu44vAMmRN4/v0.

Read more about Evli's responsible investing

Downloadable files

Invest

min. 1 000 €