Editorial


ESG AND FIXED INCOME


CONTENTS


P4 – 5: ESG and fixed income An introduction to our in-depth look at sus- tainable debt.


Saving the planet is not a part-time job. Neither is eradicating child labour or making a positive social impact. You cannot set strategies to promote such policies in one part of your portfolio then ignore them in another and claim to be a sustainable investor.


Integrating environmental, social and governance (ESG) factors into investment decisions is usually associated with equities. Owning shares in a business brings with it the threat of voting against management at AGMs if they do not improve their operating practices or corporate culture. Those lending money to the same company do not have such influence, making it difficult to integrate ESG into a fixed income portfolio. But it could be argued that lending money does give some leverage when it comes to engagement. Afterall, debt comes with conditions. One route to creating an ESG-compliant debt portfolio is to invest in green bonds. This is not straightforward as there are controversies over what makes a green bond sustainable and how the proceeds are used, while demand outweighing supply has had an obvious impact on yields. There are other sustainable-labelled bonds on the market targeting cer- tain issues, such as cleaning up the oceans, but high demand means that many investors are having to find mainstream bonds that fit their ESG strategy.


The point is that pension schemes and insurers are applying their ESG principles to the bonds they buy, it just appears to be more challenging. For this supplement we brought together a range of players from the institutional investment chain to find out how asset owners are integrat- ing ESG into their fixed income portfolios.


Mark Dunne Editor


m.dunne@portfolio-institutional.co.uk


P6: ESG and fixed income in figures A breakdown of how ESG is influencing the fixed income markets.


P7: The participants


A guide to the people contributing to this debate.


P8 – 17: Roundtable transcript Various players in the institutional investment industry discuss how ESG is being integrated into fixed income portfolios.


P18 – 19: Understanding ESG in bond portfolios


For Jennifer O’Neill of Aon, ESG integration is not just for equities.


P20 – 21: ESG and credit risk Newton Investment Management’s Scott Freedman explains why investors should not take a rear-view mirror approach to ESG.


P22-25: How green is your bond? Are sustainable bonds as sustainable as issu- ers claim?


February 2020 portfolio institutional roundtable: ESG and fixed income


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