Mitch Reznick, CFA, Head of Sustainable Fixed Income, Federated Hermes
There are complexities in creating sustainability outcomes. For example, solving one sustainability challenge in a business could create new ones.
To give a simple example: shutting down a coal mine to address climate change, if not done the right way, can lead to social stress.
The point is, sustainability is complex because the Sustainable Development Goals don't always speak to each other. They may be in conflict with one another, so the challenge is to find solutions that reduce this tension as much as possible. For that, you may need governments to step in.
Another challenge lies in the culture of sustainable data, where information varies by region as well as by sub-asset class. This is despite the fact we have global notional benchmarks that don't move - 1.5°C is 1.5°C. How do you assess a small company in an emerging market versus a very large US company against this metric?
Principles
We believe a principles-based approach responds to the idiosyncrasies of region and asset class. And this is where engagement becomes critical - speaking with companies in a consistent, credible way.
Our responsibility is to understand what the right set of objectives is; how the impact goals you set for a company may work. They will vary, but it is why we have seven dedicated sustainable fixed income analysts and engagers across our global business. This is necessarily a qualitative exercise.
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