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As a high grade global sovereign bond manager (developed markets, G7 debt) we have no exposure to authoritarian or undemocratic regimes and 100% of our exposures are rated BBB or above (and 95% are AA+ and above). Hence, our portfolio is naturally well positioned from an ESG perspective. Notwithstanding this, as a responsible market participant, we believe that we have an important role to play in being a good steward of our clients’ capital. This means that, among other things, we seek to ensure that ESG issues are considered in a robust and methodical manner as part of our investment management approach. This is particularly important given the prominent and tangible ESG related concerns in play globally.
We are committed to integrating ESG into our investment management processes and to driving ongoing continuous improvement in our approach.
Our approach to investment stewardship and considering ESG factors in our process continues to evolve and is centred around three core pillars of activity:
1. ESG research and integration
We seek to methodically and pragmatically consider ESG issues as part of our investment research and decision-making process. We believe that well informed investment decisions, in light of all key factors (including ESG considerations) leads to better risk adjusted returns for our clients (ESG as an input). Among other things, we focus macro inputs as they relate to individual countries in the predominately developed market universe that we invest.
We incorporate ESG factors by combining slower and nearer-term moving economic and financial market indicators as key inputs into our investment decision-making process. In doing so, we include ESG information and data as part of our investment decision making process. All other things being equal we will invest in green and social bonds in preference to their mainstream counterparts (ESG as an output).
2. Active ownership
While the opportunities available to sovereign debt investors to engage and influence positive ESG outcomes are different to other asset classes, we believe we have a role to play. We seek to engage in dialogue with issuers, originators and other capital market participants and stakeholders regarding ESG matters and to influence positive change.
ESG issues in a sovereign debt context are inherently systemic and market wide in nature. Accordingly, investors need to collaborate to influence positive change. Tied to this, it is important to share information and raise levels of awareness regarding key issues (both internally and externally). As part of this, we are a signatory to the PRI.
Our approach to investment stewardship continues to develop and evolve and so too will the priority themes that we seek to focus on. As it currently stands, key priority themes and megatrends include:
Climate change, Biodiversity, Water, Human rights, Diversity, Cultural heritage, Social inclusion, Sustainable financial system, Governance and Democracy.
These themes not only feed into our investment decision making but will inform our active ownership and collaborative activities.
As an active high grade bond manager, we continuously look to implement best practice approaches to ESG. Contact us for more information or for a copy of our ESG policy.