1st Edition
Responsible Investment in Fixed Income Markets
This book provides the world’s first comprehensive account of responsible investment for fixed income investors. It enables readers to understand the key characteristics of fixed income investments and the relevance of sustainability-related issues to fixed income markets.
The expert contributors to this volume explain how sustainability-related issues can be taken into account in fixed income research and decision-making, in portfolio construction, and in active ownership (engagement). They provide a series of detailed case-studies from different parts of the fixed income market (corporate investment grade and high yield, emerging markets, sovereign and municipal debt), from a range of organisations with a variety of investment approaches. The contributors also provide in-depth critical analysis of key issues such as the role and influence of credit rating agencies, green bonds, data and public policy in shaping investment practice.
For investors, this book provides practical guidance on how to improve the financial and the sustainability performance of their fixed income investments. For stakeholders such as companies, civil society organisations, and governments it allows them to understand the role that fixed income might play in delivering the Sustainable Development Goals (SDGs), and to understand how they might encourage fixed income investors to pay greater attention to sustainability-related issues in their investment practices and processes.
1. Introduction
Rory Sullivan and Joshua Kendall
Part I: Fundamentals
2. Essential Concepts in Fixed Income Investing I: Function and Analysis
David Oakes
3. Essential Concepts in Fixed Income Investing II: Participants and Portfolios
David Oakes
4. The Landscape of Responsible Investment and Fixed Income
Carmen Nuzzo and Sixtine Dubost
Part II: Sovereign Investing
5. ESG Factors in Sovereign Debt Investing
James Lockhart Smith, Mariana Magaldi de Sousa, My-Linh Ngo, Jana Velebova and David Wille
6. ESG Considerations in Sovereign and Public Finance Credit Analysis
Joan Feldbaum-Vidra, Emilie Nadler, and Andrea Torres Villanueva
7. Sovereign ESG Risk Analysis and Engagement
Scott Mather and Lupin Rahman
Part III: Corporate Investing
8. The Stewardship Mechanisms of Corporate Bond Investors
Arabella Turner
9. Connecting ESG factors with Credit Ratings
Andrew Steel and Justin Sloggett
10. The Role of ESG Risk Factors in Corporate Credit Analysis
Joshua Kendall and Tudor Thomas
11. Responsible Investment Strategies in Corporate Fixed Income
Alex Everett and Keith Logan
12. ESG Research in Different Fixed Income Sectors
Robert Fernandez
Part IV: Impact Investing
13. Impact Investing in Fixed Income Markets
Johanna Köb
14. The Impact Bond Market
Manuel Adamini and Krista Tukiainen
15. Using Bond Markets to Achieve Issuer Sustainability Outcomes
Peter Munro
16. Impact Bonds: Issuers and Investors
Radek Ján, Thomas Girard and Thibaut Cuillière
Part V: Market Influencers
17. The Role of Sustainable Treasury Teams
Arthur Krebbers and Jaspreet Singh
18. ESG Data, Ratings and Indexes
Kevin Kwok
19. Assessing the Responsible Investment Performance of Fixed Income Fund Managers
Tomi Nummela and Sarika Goel
20. Delivering Sustainable Investment Objectives through the Capital Markets
Doris Kramer and Caroline Horbrügger
Part VI: Investment Products
21. Investment Product Design and Development
Michael Ridley
22. Understanding Trends and Drivers in Fixed Income Investment Products
Hortense Bioy and Benjamin Joseph
Part VII: Looking Forward
23. Regulation, Policy and Fixed Income
Will Martindale
24. Measuring the Impact of Climate Change
James Edwards, Tamara Straus and Natalie Ambrosio Preudhomme
25. Fixed Income Markets and Responsible Investment: The Past, the Present and the Future
Rory Sullivan and Joshua Kendall
Biography
Joshua Kendall is Head of Sustainable Fixed Income at Bloomberg, and was previously Head of Responsible Investment Research and Stewardship at Insight Investment. He is an experienced responsible investment practitioner, whose experience extends across investment management, ESG research and stewardship.
Dr Rory Sullivan is CEO of Chronos Sustainability and Visiting Professor in Practice at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. He is an internationally recognised expert on climate change and investment.
'As CFA UK continues to support the investment sector to upskill and meet sustainability challenges, we are delighted to recommend this essential publication.'
CFA UK
'What really impressed me about the book was the timely and invaluable overview of fixed income and responsible investment. This enables readers to understand the relevance of sustainability to fixed income, with real life examples and contributions from practitioners and organisations. Considerable work has gone into outlining the outcomes that have been achieved and to reflect on the lessons learned. The approach taken is, commendably, one that impresses upon readers the dynamic nature of the sustainable finance movement and its relationship with fixed income, always keen to offer practical suggestions on how progress might be encouraged and developed.'
Fraser Lundie, Board member, CFA UK, and Head of Fixed Income, Federated Hermes
'How can we ensure that fixed income investments contribute to the goals of sustainable development? What role do standards and green taxonomies play in encouraging investment in socially and environmentally sustainable activities? How can we encourage greater investment in emerging markets? This book analyses the theory and the practice of responsible investment in fixed income markets. It is an invaluable guide to policymakers looking to design and implement policies and frameworks to drive sustainable finance.'
Helena Viñes Fiestas, Commissioner of the Spanish Financial Markets Authority and Rapporteur of the EU Platform on Sustainable Finance
'This book fills a critical gap in the responsible investment literature. It provides academics and researchers with rich practical insights into the realities of how investors take account of environmental, social and governance (ESG) issues in their investment practices and processes, and into the costs and benefits of doing so. It also identifies those areas – impact assessment, the influence of regulations, standards and taxonomies, the relationship between sustainability and financial performance – where academics and practitioners should work together in coming years.'
Simon Dietz, Professor of Environmental Policy, London School of Economics
'This is a timely publication providing much needed, practical advice from experts with hands-on experience. Fixed income markets have always lagged their equity peers when it comes to ESG integration, analysis and innovation. Making the leap to corporate debt is one step, but investors, issuers and regulators alike have struggled with how to bridge the gap to other types of issuers and assets. The book is a welcome compliment to the work the World Bank has been doing on sovereign ESG analysis and will be particularly useful for local investors in our client countries which have major allocations to public issuers and real asset classes.'
Fiona Stewart, Lead Financial Sector Specialist, World Bank
'Despite being the world's largest investment asset class, little is known about how fixed income investors might support and enable the transition to a low-carbon economy. This timely book comprehensively addresses that gap. It describes exactly how investors integrate social and environmental factors into their investment research and decision-making and into their engagement. And, critically, it explains how investors and other stakeholders can work together to ensure that the fixed income markets respond effectively and at the scale needed to the threats, challenges, risks, opportunities and needs presented by climate change and sustainable development.'
Adam Matthews, Chief Responsible Investment Officer (CRIO) Church of England Pensions Board and Chair Transition Pathway Initiative (TPI)
