search.noResults

search.searching

dataCollection.invalidEmail
note.createNoteMessage

search.noResults

search.searching

orderForm.title

orderForm.productCode
orderForm.description
orderForm.quantity
orderForm.itemPrice
orderForm.price
orderForm.totalPrice
orderForm.deliveryDetails.billingAddress
orderForm.deliveryDetails.deliveryAddress
orderForm.noItems
There is an education piece when it comes to client engagement in fixed income, but that tide is turning. Jennifer O’Neill, Aon


more history to it with risk management and governance always being there. If you want to get paid for your emerging market high yield bond you need to figure out who launched it. It is about investment beliefs. If climate change is important to you it needs to go into every part of your portfolio. There is no way that you can compartmentalise the risk. You cannot say that the climate crisis is happening only in equities.


which ESG is priced into credit risk. Looking historically, it is gov- ernance failures, whether it’s an accounting statement, a corrup- tion issue or poor management of the business, that lead to nega- tive credit events. The more the market realises that fixed-income investors should consider the wider ESG factors, the more we will see that priced in. It is also about identifying companies that are doing well across the range of E, S and G factors, so it is evolving in terms of analy- sis, but it is about looking at opportunities as well as managing downside risk.


PI: Is ESG in fixed income a topic that is being raised by asset owners?


Jennifer O’Neill: It is something we are talking to clients about as opposed to them raising it. The relevance of engagement in fixed income is something clients are less familiar with. Part of my role is to help them understand that engagement is relevant to fixed income portfolios. It is some- thing that they could have real weight in doing if a company wishes to raise debt capital at an attractive price. There is an education piece when it comes to client engagement in fixed income, but that tide is turning. Tomi Nummela: It’s not necessarily a new concept. There is a bit


PI: Engagement is possible in fixed income, but how easy is it to get companies to change when you cannot vote at an AGM? Gull: We have maximum influence when the bond is originated. The borrower wants your money, so you have leverage at that point. We do a lot of direct or bilateral loans and this is a good time to talk to potential borrowers about what they are doing about these things. When it comes to universities, for example, we talk to them about what they do for student welfare. Are there proper fire standards in the student accommodation block? It is harder for listed bonds, particularly if you have a small hold- ing and there are a lot of bonds out there, but we should not be shy of that. As an industry we need to start asking more questions. We find that most issuers are responsive as they are aware that this is a factor. Pickering: Even good companies have a limited amount of time to engage with asset owners. Traditionally, the CEO or chief invest- ment officer has had a visit from the equity specialists within an investment institution and then the fixed income specialist wants to meet them. There is a degree of integration going on in the asset management community where you send the transport specialist to meet the chief executive of a transport company and then discuss equity and debt holistically rather than have two bites of the cherry and risk irking the people that you want to co-operate with. Freedman: We are in a fortunate position with our equity and fixed- income analysts sitting together on the same floor in London. There have been multiple occasions where I as a credit analyst have been to equity meetings. In public companies, equity inves- tors get better access to senior management, while in high-yield credit, investors get good access because they have fewer avenues to raise capital.


In equity markets, investors have more means through which to work together when engaging with companies. There is Climate Action 100, and work is being done in the oil and gas industry, but that is in its infancy within fixed income. I hope to see much more collaboration here because ultimately you are going to be a much smaller proportion of the total debt holding and you don’t get a vote. Clubbing together with other asset managers is an effective way to effect change. We see the most measurable improvements in engagement in smaller, private companies. These typically have a weak credit rat-


February 2020 portfolio institutional roundtable: ESG and fixed income 9


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