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Achieving New Frontiers The Role of Bonds in Sustainable Investing

Incorporating sustainability principles into investment strategies has typically been seen through the lens of equity investments, but we believe fixed income assets play an equally important role in fostering corporate responsibility and integrating environmental issues into investment strategies with sustainability investment objectives.

State Street Global Advisors’ new survey, The Climate Opportunity, found 29% of institutional investors say climate bonds would be a focus for their investments over the next 12 months.

When considering fixed income investments in the context of incorporating sustainability objectives into investment portfolios, institutions face several issues. Access to meaningful data on sustainability factors is a challenge in all asset classes but is particularly acute for some types of fixed income assets. Stewardship and engagement are a further challenge since bondholders have no voting rights on corporate strategy.

Furthermore, these challenges vary in their intensity across different types of fixed income assets from sovereign debt to bonds issued by supranational bodies, such as the World Bank or other international development organizations, and of course corporate issuers.

However, these challenges are not insurmountable and solutions from State Street Global Advisors are available to help institutions bring their climate investing objectives to bear on fixed income.

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