Fixed income

ESG analysis provides fixed income investors with additional insight into issuer creditworthiness. To hear more about our fixed income work, contact us.

A practical guide to ESG integration in sovereign debt

Despite its size and importance, the sovereign debt market has been the subject of less systematic environmental, social and governance (ESG) consideration than other investment asset classes. However, appetite for ESG integration is growing among investors, with a rising number appreciating that ESG factors can and do affect sovereign debt ...

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The ESG in credit ratings initiative aims to enhance the transparent and systematic integration of ESG factors in credit risk analysis. The PRI is facilitating a dialogue between credit rating agencies (CRAs) and investors to cultivate a common language, discuss ESG risks to creditworthiness and bridge investor-CRA disconnects.

Read more about the ESG in credit ratings initiative

ESG incorporation in private debt provides LPs and GPs with additional credit risk insights throughout the deal cycle.

Read more about our work on private debt

Bondholder engagement resources

Bondholder1

ESG engagement for fixed income investors: Managing risks, enhancing returns

Principle 2 of the six Principles encourages investors to be active stewards of their investments and incorporate ESG factors into their ownership policies and practices across different asset classes.

Engaging with non-investment grade issuers

Case study by Neuberger Berman

Engaging with a state-owned enterprise issuer

Case study by Hermes Investment Management

Engaging to deepen insight

Case study by Breckinridge Capital Advisors

Engaging with sovereign green bond issuers

Case study by BNP Paribas Asset Management

Engaging with issuers

Case study by KfW

Screening and engaging to mitigate ESG risks

Case study by Futuregrowth Asset Management

Webinar: ESG engagement for fixed income investors

Integrating ESG factors into issuer analysis

In fixed income, a key application for ESG information is to inform analysis of issuer creditworthiness. ESG issues, such as corruption or climate change, are potential risks to macro factors that may affect an issuer’s ability to repay its debt.

ESG screening in fixed income investing

Fixed income investors apply ESG filters or screens to their investment universe to control which issuers or securities are considered for investment. This is an effective way of ensuring their investments are aligned with their (client’s) ethical motivations and reduces reputational risks.

Proportion of PRI signatories engaging with issuers on ESG management (2014)

Engaging issuers on ESG issues

Debt and equity holders both stand to benefit financially from successful engagements, as ESG-related risks are mitigated and opportunities maximised.

Growth of green bonds issuance 2007–2014

Themed fixed income investing

Investment products such as green bonds are seen by many as a way of addressing ESG risks such as climate change and water scarcity.

Sovereign and sub-sovereign case studies

Education and European government bonds

Case study by BNP Paribas Investment Partners

Integrating ESG factors in partnership with an NGO

Case study by Allianz Group in Austria

Corporate case studies

Thematic bonds: the issuer and investor perspective

Case studies by Massachusetts Bay Transport Authority and Breckinridge Capital Advisors

Resilience to climate change in the UK water sector

Case study by Royal London Asset Management

Integrating ESG factors in partnership with an NGO

Case study by Allianz Group in Austria

Community development programmes in Mexico

Case study by HSBC Asset Managment Mexico

Financial sector and ABS case studies

ESG in UK social housing investment

Case study by M&G Investments

Integrating ESG factors in partnership with an NGO

Case study by Allianz Group in Austria