ESG Everyday: A Framework for Fixed Income Portfolios
The words Environmental, Social and Governance have become commonplace in the lexicon of investors of late. Though the ESG spotlight often falls on equity investors, the consideration of ESG factors is equally paramount in the world of fixed income, both from an investor and an issuer’s point of view.
This article was reproduced from Fiera Capital’s contribution to CFA Toronto’s Analyst Magazine – December 2020 issue
As one of the largest managers of fixed income in the country, Fiera Capital’s Integrated Fixed Income (IFI) team carries significant weight in terms of influencing an issuer’s funding costs and promoting alignment with sustainable initiatives. We can therefore be an agent of change for the industry, and as such, we take it upon ourselves to consider ESG factors in all aspects of our investment process.
Despite the popularity of ESG investing, fixed income investors have little clarity around how it actually takes place in their portfolios. We propose that there are three elements to the proper incorporation of ESG factors into fixed income portfolios: Integration; Engagement; and Reporting. Below, we discuss how the IFI team leverages this model to make ESG analysis part and parcel of the investment process.