Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Challenging and uncertain times for financial markets and the global economy.
• Sovereign debt crisis, especially in the Euro Zone, could generate significant losses.

Mitigation Strategies

• Investment strategy to take advantage of market opportunities and execute asset switches to increase or stabilize expected asset cash flows.
• Focus on assets with ongoing stable cash flows and principal redemption.
• Asset switches to transactions offering better value.
• Currency options to reduce cash calls when the dollar appreciates.
• Active management of Corporate Credit portfolio: increasing exposures and industry diversification, decreasing tail risk.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Third-party Assurance: KPMG Channel Islands Limited

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Negative performance in December mainly reflected price decreases in CLO tranches, both debt and equity tranches due to mark-to-market price declines seen during the month for underlying USD or European loans.

Mitigation Strategies

• Took the opportunity of the December price declines to purchase more assets, deploying the surplus cash balances previously held. €21.8m was invested.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Environmental, Social and Governance (ESG)

Governance Achievements

• Certain ESG considerations are now being integrated into the CLO manager selection process for Volta; some issuers and businesses are being systematically excluded (e.g., those involved in oil, gas, thermal coal extraction, or controversial weapons).

Climate Goals & Targets

Environmental Challenges

• Credit risk
• Sentiment-driven volatility affecting NAV
• Reinvestment risk in favorable economic conditions
• Currency risk (partially hedged long $ position)
• Share price discount to NAV materially larger than most peers

Mitigation Strategies

• Hugely diversified portfolio (700+ borrowers, diversified by sector, geography, and macroeconomic sensitivity)
• Flexible mandate to optimize returns in various market conditions
• Modest gearing to avoid forced asset sales
• Multiple controls to ensure valuation validity (external pricing, manager overview, auditor review)
• Board actions to broaden company awareness and understanding

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Climate Change
• Human Rights
• Corruption

Climate Goals & Targets

Environmental Challenges

• Sustainability risks in social, environmental, or governance areas.

Mitigation Strategies

• Integrated approach to sustainability risks based on global policies and processes; exclusion policies limiting investment in sectors, companies, and assets exposed to ESG risks (climate, biodiversity, human rights, corruption); ESG factor integration in investment decision process; sustainability risk assessments during due diligence.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: SFDR

Environmental Metrics

ESG Focus Areas

• Responsible Investment

Governance Achievements

• Formal dissolution of the Risk Committee, with responsibilities subsumed into the Board.
• Participation in the Board Apprentice Scheme to foster equality and develop board culture.

Climate Goals & Targets

Environmental Challenges

• Challenging market conditions due to the war in Ukraine, volatility, inflation, and energy instability.
• Potential increase in default rates in 2023.

Mitigation Strategies

• Active portfolio management by AXA IM.
• Diversified investment portfolio by geography and industry.
• CLO structures designed to withstand defaults.
• Investment in new positions with high projected yields.
• Hedging of currency exposure.
• Adding duration to the portfolio using futures and options on T-Notes and short payer swaptions in Euro.

Supply Chain Management

Responsible Procurement

• Systematic selection of CLO managers that implement critical ESG measures.
• Industry Exclusions imposed on all new CLO investments in 2021.
• Communication with CLO managers regarding ESG in 2022.
• Exclusion of CLO managers not meeting ESG criteria.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: AIC Code of Corporate Governance 2019

Third-party Assurance: KPMG

Environmental Metrics

ESG Focus Areas

• Climate change
• Responsible Investment

Governance Achievements

• Realignment of Volta’s fee arrangements, lowering the threshold of the tiered management fee and enhancing the annual performance fee structure.

Climate Goals & Targets

Environmental Challenges

• Disappointing share price discount to NAV.
• Supply-side issues in CLO market (arbitrage between asset and liability spreads finely balanced, equity returns less than desired).
• Challenges in gaining acceptance from US CLO managers for ESG exclusions.

Mitigation Strategies

• Close monitoring of discount and other financial health indicators.
• Opportunistic investments in CLO Debt tranches, CLO Equities and first loss warehouse investments.
• Systematic pushing for industry exclusions when investing in new CLO positions and conducting meetings with CLO managers to update understanding of their ESG/Responsible Investment practices.

Supply Chain Management

Responsible Procurement

• Industry exclusions (Controversial Weapons, Thermal Coal, Oil & Gas, Arctic Oil, Non-Sustainable Palm oil, Soft-Commodity trading, Land Use Biodiversity & Forests, UNGC violations, Tobacco and Coal mining).

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD