Member engagement is important, but I do not want them to vote on what I do with the money. Lasocki: For me, active engagement is generally better than simple exclusions. I am sure members would rather their money is working to improve the world we live in. I would pre- fer to own debt of an oil producer which is bad for the environ- ment and force it to improve rather than allow someone else to buy it cheaply and let them continue to pollute. Some investors will have a list of exclusions and I appreciate you cannot always engage with certain governments, but through active engagement, particularly with corporates, you can do a lot of good with your money in emerging markets.
How much influence can a bondholder have compared a shareholder? Lasocki: I would say it is significantly more. In equities you are constantly in the secondary market, which doesn’t matter that much to companies – they already have investors’ money. If
18 September 2022 portfolio institutional roundtable: Emerging market debt
anything, when everyone dumps their shares, they can buy them back cheaply. But in the debt space, they have to behave and improve because the next time they come for your money they will have to pay more for it. Debt investors are more influential than equity investors. Arevalo: If you are able to push a company to do the right things over the medium term, spreads will tighten. Most companies are frequent issuers as they want to diversify their funding away from equity and banks. You set targets for them, which if they miss will pay more the next time they need debt. We have a lot of power to push them in the right direction.
How easy is it to get accurate data from borrowers to prove they have hit your targets? Arevalo: Most companies have dedicated ESG departments, which makes it easier to access information. You also set clear
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