Invesco’s $30bn senior loans business is converting its Floating Rate Fund to an ESG compliant strategy.
The company has introduced several new screens for the newly branded Invesco Floating Rate ESG Fund which will allow its team to evaluate potential investments using a proprietary framework which rates each issuer’s ESG credentials.
The fund’s objective will remain the same with the strategy designed to generate high levels of income and capital appreciation through investing in senior loans extended to large banks and financial institutions.
This revision, however, will mean that a thorough ESG analysis has been introduced to the portfolio management of the fund, including an industry screen and a comprehensive rating of each issuer.
“ESG plays a critical role in Invesco’s credit underwriting process and is a key discussion factor in the investment team’s credit evaluation of potential investment opportunities,” said Scott Baskind, chief investment officer and head of global private credit at Invesco.
“We believe ESG due diligence results in a distinct, deeper level of understanding of company risk, in addition to evaluating potential credit risks associated with an issuer and their ability to service their debt.”
As part of the newly revised process, prior to investing in a company and throughout the ownership of the company’s debt, the team will also engage with company management to discuss specific issues that relate to ESG.
“Because bank loans are private instruments, there is only a small subset of the investable universe that is rated by third parties with respect to their ESG initiatives,” Baskind explained.
“This led us to develop our own robust ESG ratings system designed to evaluate private credit opportunities and promote engagement with management at the organizations within the portfolio.”
The fund — in its former guise — had a four star rating from Morningstar as at the end of June 2020.