Invesco has launched an environmental bond fund that focuses on income generation and growth and which will support the transition to a low-carbon economy according to the firm.

The Invesco Environmental Climate Opportunities Bond fund, (Eco Bond) uses credit research and corporate climate analysis to invest in bonds issued by companies with strong climate characteristics.

Its primary targets are those in the investment grade, high yield and emerging market sectors, although it can invest in government bonds as a way to manage risk and liquidity.

According to the firm, the fund will invest in issuers with low emissions, those that currently have high emissions but have scope to reduce the output, transition and sustainability-linked bonds that raise funds for climate-friendly projects, and those that have made net zero commitments.

The fund will be managed by Michael Matthews, co-head of the Henley fixed interest team, and Tom Hemmant, fixed income fund manager at Invesco.

Alexander Millar, head of UK distribution at Invesco, said: “The Eco Bond fund is a response to substantial client demand for a strategy which leverages the vast expertise of our 24-strong Henley Fixed Interest team in combination with our considerable ESG capabilities to invest for income and growth in a way that supports decarbonisation.”

The Eco Bond fund will also exclude businesses in sectors such as thermal coal extraction.