The road to this point has been bumpy, with several stumbling blocks making it harder to implement a ‘true' style of ESG investing in the fixed income space.
One of the biggest issues is that fixed income investors do not get a seat at company AGMs, and are therefore unable to vote. At the same time, the availability of data in the fixed income space is much less transparent than in equities; it is estimated that at least a third of the bond investment universe is not currently covered by publicly available data.
While being challenging, true ESG investing in this asset class is by no means impossible and does not have to be more difficult than in the stock market, according to Graeme Anderson, partner and portfolio manager at TwentyFour Asset Management. The key, he says, is to have the right building blocks, meaning the underlying data and research to inform investment decisions.
This data is constantly improving and has benefitted from the adoption of a formalised approach that drills down deeper into ESG issues. Anderson points out that some form of ESG consideration has been inherent in fixed income investing for decades, particularly on the governance side.
"The big change that we have seen is that we are now conducting more formal analysis of ESG," he says. "Formalising it has made it much more powerful and it is spreading out to look at more environmental and social issues."
