Captor Dahlia Green Bond is an Article 9 fixed income fund that primarily invests in green bonds. Captor Fund Management's head of sustainable investment, Sanna Petersson, explains how the fund's strategy has evolved to support real-economy decarbonisation.

Environmental Finance: What inspired you and your team to develop the sustainable fixed income strategy you have today?

Sanna Petersson: We launched our green bond fund in 2018 and have closely followed the evolution of sustainability regulation. But after years of watching the market develop, we felt it was the right thing to go back to basics and focus on what ultimately matters: reducing emissions.

Almost all negative environmental impacts have emissions at their core. If we are serious about limiting global warming, we need deep, rapid and sustained reductions in greenhouse gas emissions. That became the foundation of our strategy. It was not about labels or reporting first; it was about decarbonisation.

We had been investing in higher-emitting companies since the fund's launch, often having to explain why. Heavy industry and transition-focused companies are essential to achieving climate goals, so the strategy we have today is a formalisation of that conviction.

EF: How do you identify the sectors with the greatest long-term impact and investment potential?

SP: We started with global emissions data and analysed where emissions originate across the value chain. If you focus only on the final green product, you overlook much of the industrial value chain that makes it possible. For example, wind turbines require large amounts of steel and concrete, whose production relies on mining, while decarbonising these sectors requires electrification, advanced machinery and access to reliable clean power.
Our analysis therefore focused on how these high-emitting sectors are connected. By understanding these linkages, we can target areas where investment has the potential to drive emissions reductions that extend well beyond the individual project being financed.

EF: Can you outline the development process – from concept to implementation?

SP: The core idea is simple: real decarbonisation cannot happen by financing only "clean" end-products.

In 2025, we formalised this thinking into a strategy centred on five areas: fossil-free energy and electricity production; energy storage and electricity systems; heavy industry; mining and raw materials; and manufacturing machinery and equipment. During the year, we repositioned the fund to increase exposure to these sectors

One key lesson has been understanding investment cycles. These sectors operate on very long horizons. We are comfortable investing in companies with high emissions if we see credible transition pathways. On a simple carbon-screening basis, some of these companies may not look attractive. For us, that is exactly the point. The critical question is whether capital is flowing to where transformation is actually occurring.

This approach is also aligned with European policy. Initiatives such as the Critical Raw Materials Act and the Clean Industrial Deal reflect the same logic: resilient, sustainable industrial supply chains are essential to the transition.

As a Swedish manager, we also see many local opportunities in mining, industrial innovation and low-carbon energy, including nuclear power. These sectors will play a crucial enabling role.

EF: How important are entity-level transition assessments alongside use-of-proceeds analysis?

SP: Very important. Green bonds provide transparency on how capital is allocated and allow us to assess the environmental impact of specific projects. But we do not stop at the project level.

We assess whether financed projects are aligned with the issuer's broader decarbonisation targets. This provides a more complete picture of real-world impact and has, in some cases, led us to decline investments where the underlying green project was positive, but the issuer's overall transition plans lacked credibility

EF: Were clients and asset owners initially comfortable with investing in higher-emitting sectors?

SP: In the early years, we certainly had to explain ourselves more. One example was our investment in Snam, the Italian gas infrastructure company. We invested early, around 2019, and many questioned why a gas-related company belonged in a green bond portfolio.

For us, the transition case was clear. Italy had long been heavily dependent on natural gas, and the infrastructure already existed. Moving directly from that system to full electrification is extremely challenging. A more realistic pathway involved improving and gradually decarbonising the gas network, including integrating cleaner gases over time.

The company has since made substantial progress in reducing emissions and investing in transition projects. Investments like that validated our approach.

EF: Looking ahead, where do you see the greatest opportunities for fixed income investors?

SP: In some ways, green bonds have lost attention for the wrong reasons. Yet for strategies like ours, which finance specific projects in hard-to-abate sectors, the use-of-proceeds structure remains incredibly effective because capital is tied directly to decarbonisation investments.

There is a major opportunity to reframe how investors view green bond funds. For a period, many institutions treated green bond allocations almost as a box-ticking exercise. But the real value lies in how the strategy uses the instrument. When used properly, green bonds remain one of the most powerful ways to finance real-economy decarbonisation.

For more information, see: www.captor.se/fonder/dahlia