«For us climate transition and financial returns are two sides of the same coin»

On Thursday, 02.05.2024, Andrea Carzana from Aviva Investors welcomed me at the super-fine «The Walbrook Club» in London, where he is a member. I was deeply impressed by the joy and conviction with which he explained his job to me. Of course, it’s great to be able to work for such a large organisation and have excellent funds. To summarise: the conversation was extremely interesting and the coffee tasted delicious. Thomas J. Caduff, CEO, Fundplat LLC

• Caduff: Mr. Carzana, your speciality is «climate transition». What exactly does that mean?

Carzana: Climate transition to us means investing in companies that either offer a solution to reduce emissions or that are transitioning their business model to a net zero environment. The «Global Climate Transition Equity Fund» is categorised by us as an article 9 fund that has a dual mandate aiming to generate long term capital return while investing in companies that provide solutions to help tackle climate change or support the transition to a net zero economy. For us climate transition and financial returns are two sides of the same coin.

• Caduff: How do you use these insights to build a bridge to the world of equities?

We want to invest in companies that can translate their climate focus into a stronger competitive advantage. Andrea Carzana

Carzana: We have developed our internal «3D sustainability framework» where companies are assessed on 3 equally important Sustainability pillars. Firstly, we assess the Internal Sustainability where the focus is mostly on governance. Secondly, the Financial Sustainability pillar is where we assess whether a company has a sustainable competitive advantage that leads to strong free cash flow generation and high retun on capital employed. Lastly, the External Sustainability is where the focus our analysis on the climate outcome the company achieves or facilitates.

What is critical is to assess whether a company is able to translate the external sustainability into stronger financial sustainability; in other words, we want to invest in companies that can translate their climate focus into a stronger competitive advantage.

• Caduff: The question always arises in climate discussions: do investors have to accept lower returns?

Carzana: We run a very concentrated bottom-up fund with a dual mandate where we consider climate transition and financial returns as two sides of the same coin.

We believe that companies with sustainable competitive advantages that compound strong return on capital employed and free cash flow growth while supporting the transition to a net zero environment will help us achieve our goals.