Partner Insight: Is fixed income a fast track or a hinderance to net zero?

Investment grade issuers offer a substantial engagement opportunity

Gareth Jones
clock • 1 min read
Fraser Lundie CFA, Head of Fixed Income, Public Markets, Federated Hermes
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Fraser Lundie CFA, Head of Fixed Income, Public Markets, Federated Hermes

With robust balance sheets and diverse earnings streams, investment grade issuers are well placed to embrace the net zero transition. Their commitment to sustainability is often extended over a long period of time, enabling them to invest in sustainable initiatives.

"Investment grade issuers have access to a robust engagement process," explains Fraser Lundie, Head of Fixed Income, Public Markets at Federated Hermes.

"There tend to be good governance frameworks in place, the impact of their decarbonisation strategy is often substantial, and they are openly engaging in detailed discussions with a variety of investors like us."

Size, scope and scale

Lundie further emphasises the fact that investment grade issuers' decarbonisation actions can significantly impact the industry landscape and inspire smaller players to embark on similar journeys. "Getting investment grade companies to change is hugely impactful given their size, scope, and scale.

"These companies often return to borrow money frequently, and so engagement between us is fruitful because there is an acute understanding of debt capital markets being their lifeblood and us as investors a crucial element.

"Having these frequent interactions allows our engagements to focus on what has been delivered on over a longer-period of time and help move towards their target goals."

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