PI Partnership – Newton Investment Management
SUSTAINABLE BONDS: HOW REGULATION WILL HELP SHAPE GROWTH
Scott Freedman is a fixed income portfolio manager at Newton Investment Management
Fixed-income markets are key to funding the journey towards a better environmental and social future, as most of the fund- ing required is likely to come from debt rather than via equity. With a large range of stakeholders involved, it will take time not only to agree on the roadmap and how best to achieve it in our lifetime, but also on how to put plans into action, and reg- ulation will have an integral role to play in the process. Regulators have continued to work hard on developing sustaina- ble rules and taxonomies, and, in our view, are the single biggest driver of shaping the sustainability journey. As policy evolves, there is a need for the development of local regulations to keep pace by implementing minimum standards and encouraging the expansion of ESG products to finance the transition. Work is under way globally on a number of taxonomies, with Europe continuing to lead the charge, but certain sectors of sustainable fixed income are yet to be covered in the European Union (EU) taxonomy, along with lower-impact activities. This year we may see the formal adoption of the EU’s Comple- mentary Delegated Act, which means that the EU taxonomy will include specific nuclear and gas-energy operations within the list of economic activities covered. We may also see the adoption of the EU Green Bond Standard, which comprises rules set up to explain how issuers can use green bonds to finance ambitious investments, while simultaneously meeting tough sustainability requirements and minimum standards to protect investors and reduce the risk of greenwashing. Last November’s COP26 announcement of the creation of the International Sustainability Standards Board (ISSB) was par- ticularly noteworthy. The standards will provide the foundation for consistent global ESG reporting standards (IFRS Sustaina- bility Disclosure Standards) that will enable companies to report on ESG factors affecting their business. The expectation is that the ISSB will carry out a thorough public consultation in 2022, to give all stakeholders across the world an opportunity to provide feedback. This includes the consideration of work involving thematic and industry-based requirements. Further details on the EU’s social taxonomy are expected this year, but we believe it may take some time to agree, given the varying social constructs of different regions and countries, which means authorities may have diverse priorities.
28 April 2022 portfolio institutional roundtable: Fixed Income
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 |
Page 33 |
Page 34 |
Page 35 |
Page 36
