An established global alternative investment manager, CarVal Investors has launched its CarVal Clean CLO platform. CarVal Investors and Insig AI, a data science and machine learning (ML) solutions company, have developed proprietary technology to manage CLOs based on an integrated approach to ESG and profitability. It is the first technology of its kind in fixed income and will be available to private and public issuers alike, creating a transparent and auditable risk assessment that can be compared with relevant benchmarks.
Lucas Detor, a managing principal of CarVal Investors, said, “The creation of this ESG-compliant platform will expand our CLO offerings to include CLOs that will be managed using our proprietary ESG risk assessment methodology. At CarVal, we believe ESG risks can have a material impact on the performance of credit investments. This new model will enable us to measure ESG risk at an issuer and portfolio level to create a unique and attractive product for investors. Ultimately, we believe this strategy aligns with our long-term goals of reducing the cost of capital for ESG-minded companies by creating an independent, auditable and comparable risk assessment model.”
CarVal’s ESG risk assessment model scores assets based on six themes:
- Carbon emission and carbon footprint, including climate change
- Nature Capital, including raw materials sourcing and water stress
- Polluting sources, including wastes and toxic emissions
- Health and safety, including labor management
- Liability for products, including product safety and consumer financial protection
- Boards and ownership in corporate governance
Based on the ESG risk measurements, a composite ESG risk assessment is generated, which is then compared for credit and portfolio level purposes.
Chris Mawn, who leads the corporate loans team at CarVal Investors, said, “CLOs were tested through the crucible of the global pandemic-led recession, proving once again the power and robustness of the product structure. What has emerged is a $1 Trillion global CLO market with investors in search of greater ESG integration and transparency. We are launching this new platform to meet this emerging need with the mantra of doing good and doing well without sacrificing returns.”