The importance of responsible investment in fixed income cannot be overstated. On average, pension funds around the world have 34% exposure to different types of debt. In recent years the Eurozone debt crisis, the sub-prime mortgage crisis, countless corporate downgrades or defaults due to corruption and other scandals have reminded investors just how much they stand to lose from an asset class that has historically been considered a safe haven.
Responsible investment is not a new thing, nor is it very different from orthodox investment strategies, it’s simply about doing things better. In a fixed income context it means thinking about how issues like environmental regulation, labour relations and corruption might affect issuers’ creditworthiness. Environmental, social and governance (ESG) factors are, ultimately, material to investment performance and institutional investors are increasingly using ESG analysis as a way of gaining additional insight into the value of a bond and of identifying the most serious risks in their portfolios.
About the work stream
The PRI Initiative works with its signatories to promote responsible investment in fixed income. The three main priorities of this work stream are to explore:
- the extent to which ESG factors can be material to credit strength;
- the different ways in which investors use ESG analysis in their investment process; and
- exploring how debt holders can be more active stewards of their investments.
Throughout 2013 and 2014 the PRI Initiative will look at how debt holders are applying ESG analysis and how they can engage issuers to more actively manage risks related to ESG factors. Find out more about this project by clicking here (signatory login required).
Resources listed may require PRI signatory extranet access.
- Responsible investment in fixed income (London, 4 February 2014) – includes a written overview of the event, session presentations and associated news articles
- Corporate Bonds: Spotlight on ESG Risks (December 2013)
- Sovereign Bonds: Spotlight on ESG Risks (September 2013)
- Fixed income discussion paper (June 2011)
- Linking ESG issues and corporate creditworthiness (October 2012)
- Linking ESG issues and sovereign creditworthiness (October 2012)
- Corporate Fixed Income: Strategies for the Responsible Investor (October 2011)
- Green bonds – a viable alternative for fixed income investors? (August 2011)
Previous PRI in Person sessions
- Responsible investment in emerging market debt (October 2013) – presentation slides and audio recording
- Responsible investment and sovereign debt – what are the links? (June 2012)
- Fixed income: key challenges for the responsible investor (September 2011)