Franklin Templeton has launched a fixed maturity green income fund aimed at addressing environmental, social and governance (ESG) issues such as CO2 emissions and water scarcity.
The third sub-fund of the Luxembourg-registered Franklin Templeton Opportunities Funds (FTOF) range, it aims to invest primarily in higher yielding, euro-denominated debt securities issued by corporations around the globe, including emerging markets.
Managed by David Zahn and Rod MacPhee, the Franklin Green Target Income 2024 Fund will have a strong focus on engaging with investee companies.
“While analysts routinely engage with companies regarding idiosyncratic ESG risks, the fund management team believes that energy transition and water scarcity risk will grow in prominence over the lifetime of the fund,” the US-based asset manager said.
For this reason, the fund management team aims to find out what companies are doing to handle these challenges.
According to Zahn, a lot of high yielding companies are “not traditionally focused on ESG metrics”, while around 90% of global carbon emissions come from sectors that Franklin Templeton regularly invests in.
“We generally believe that regulation will have an impact on companies as two-thirds of all recorded climate change laws were passed in the last decade,” he said.
“We think the story is similar for water - 70% of the world’s freshwater use and pollution comes from companies in food, textile, energy, industrial, chemicals, pharmaceuticals and mining sectors. This isn’t sustainable.”
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