The Royal Bank of Canada’s specialist fixed income manager, BlueBay Asset Management (BlueBay), has launched its latest ESG-focused strategy. 

The BlueBay Total Return Diversified Credit ESG Fund enables fixed income investors to gain an exposure to the firms ‘best ideas’ through an ESG lens across global high yield, bank loans, financial capital bonds, structured credit, Convertible bonds, emerging markets and developed market investment grade.

The new Luxembourg SIF fund, which is categorised under Article 8 of the Sustainable Finance Disclosure Regulation (SFDR), will focus on using BlueBay’s proprietary ESG research to identify and avoid investments with excessive ESG risks. The strategy will also focus on progressing the lower carbon agenda by avoiding companies deriving revenues from oil sands and arctic drilling, and limit exposure to companies with revenues derived from thermal coal or fossil fuel exploration and production. It will also exclude sovereigns that have not ratified the Paris Agreement. In addition, controversial weapons, a standard exclusion for all BlueBay funds, and tobacco will not be included.

Investing in the fund at launch is Lloyd’s of London, a leading insurance company. Lloyd’s Investment

Manager, Steven Koemanm says: “This is a further step for Lloyd’s in integrating ESG factors across all our investments as part of our wider sustainability ambitions.”

The Fund will be managed by BlueBay’s Head of Multi-Asset Credit, Raphael Robelin and Senior Portfolio Manager, Blair Reid, supported by Portfolio Manager, Maria Satizabal.

Reid says: “Investors want more ESG without sacrificing returns. Our innovative approach is to target a similar yield to our standard MAC strategy by adjusting the credit risk within our MAC ESG strategy (BB on average for MAC ESG, versus BB+ for standard MAC). We are excited to be launching this latest iteration of our multi-asset credit offering. It feels an understatement to say that investors are increasingly focused on the impact their money is having on the world from an ESG perspective, so for us, this fund is a natural next step in the evolution of our product suite.”

This latest fund adds to BlueBay’s growing suite of ESG-focused products, including its Impact-Aligned Bond Fund, Investment Grade ESG Bond Fund, and Absolute Return ESG Bond Fund, which were all launched earlier this year.