Swesif’s Take on Sustainable Fixed Income

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    Stockholm (NordSIP) – Sweden’s Sustainable Investment Forum (Swesif), an association that aims to spread information, engage the asset management community, and raise awareness about sustainable investments, is teeming with activity. Some 120 members strong and still growing, the organisation has several working groups striving to shed light on various relevant aspects of sustainable investing. At a webinar on 27 April, it was time to summarise (in Swedish) the work done by one of these dedicated project groups, Sustainable Fixed Income and Credit Management.

    What prompted Swesif’s members to examine the question in the first place was a hypothetical assumption that the ESG integration in credit and fixed income management still lags compared to that in equities. Therefore, the first part of the study is dedicated to looking for evidence on whether this is indeed the case. Further, the project seeks to identify working methods, tools, and best practices in sustainable fixed income investing to accelerate the development in this area.

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    At the project’s onset, Swesif initiated a survey among its members to gauge their take on the issue at hand. There were twenty respondents in total, representing both asset managers and asset owners with assets under management of SEK 300 billion on average (SEK 116.5 billion of which is fixed income). They were all very forthcoming in describing how their respective organisations integrate sustainability into managing their fixed-income portfolios, the obstacles they encounter, and their expectations for future development in this area.

    At the webinar, the working group, led by Lingyi Lu, Head of ESG-research and Sustainability at Söderberg & Partners and a board member of Swesif, and Tobias Lindbergh, Head of Sustainable Finance at Svenska Handelsbanken, shared the conclusions drawn by the project group after analysing all the responses. Some key takeaways they pointed out were the following:

    • The majority of respondents have set specific sustainability objectives for their credit and fixed-income investments;
    • The most common target among respondents is related to the portion of the fixed-income portfolio to be invested in sustainable bonds;
    • Obstacles that the participants in the survey repeatedly describe are the lack of standardised and relevant data, e.g., climate-change-related data.
    • The sustainability data’s reliability and timeliness are described as challenging, as is the backwards-looking nature of data from external providers;
    • The sustainability analyses of government bonds and bonds, in general, are perceived as deficient.

    Respondents also expect increased activity in fixed-income sustainability analysis and engagement with bond issuers going forward. The main drivers for this development, according to the report, are higher client expectations, the opportunity for better dialogue with issuers, and more in-house resources and support.

    “As bonds mature and the companies are forced to refinance, it creates recurring opportunities for dialogue between investors and issuers. By using these recurring engagement opportunities, we as investors can help drive positive sustainability development,” comments Lingyi Lu.

    There seems to be a strong consensus that more collaboration is needed in the future to further promote sustainability in the area of fixed-income investments. Let us hope that the report of Swesif’s project group sparks even more concrete actions among the forum’s members and beyond.

    Image courtesy of Söderberg & Partners, Swesif, NordSIP
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