We need to differentiate between energy price inflation and the longer-term inflation in general.
What trends do you expect to emerge in sustainable debt? Emmons: More and more investors are moving into funds with a more explicit ESG focus. It is not really a case of changing asset classes but rather one of improving the efficacy of your exposure to an asset class with a more explicit emphasis on risk and sustainable outcomes.
This is a journey but ultimately everyone knows that to build viable long-term fixed income portfolios they have to be aware of the ESG and the risks to sustainability. Thompson: In the defined benefit space, as funds mature, inves- tors are moving away from conventional funds to buy-and- maintain. The pressure on buy-and-maintain managers to incorporate ESG, particularly the E, is greater than it was three years ago. There is more money going that way. Bikos: There is greater demand for low carbon products from our defined benefit, defined contribution and wealth manage- ment clients. This is big right now and will continue for at least two to three years.
Yu: When we interview bond fund managers, we have moved away from traditional ESG rating or negative screening such as controversial sectors. We want to know if they have a climate transition framework and how that is reflected in the portfolio. Some managers talk about their climate transition framework and climate solutions, but when we look at the model portfolio, we often find focus on divestment on existing holdings. This is not what we want. To make a real impact on the economy, we want to invest in cli- mate solutions rather than divest from brown companies. As asset owners, we will be looking more at climate transition bonds, not just the ESG rating of a bond. This is the change we are seeing.
1) Article 8 funds promote E or S characteristics but do not have them as the ove- rarching objective
2) Article 9 funds have sustainable goals as their objective. 3) MIndirect carbon emissions through electricity usage
June 2022 portfolio institutional roundtable: Sustainable debt
21
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
