Moving ESG into fixed income

While global interest in ESG investing has been on the increase, it has also spread beyond its traditional domain of the equity markets to other asset classes, including fixed income.

16 Jan 2020

We believe embedding Environmental, Social and Governance (ESG) criteria at the core of the investment process leads to better informed investment decisions and constructing better risk-adjusted strategies.

Investing in a sustainable fixed income strategy allows investors to dig deeper as sustainable investing enhances insight on the risks by broadening the data set to include material, non-financial ESG metrics alongside financial data. As we incorporate sustainability at the core of the investment process, we are convinced this will allow:

  • A more complete view of significant risks issuers are exposed to 
  • A better way of anticipating and taking a cautious stance on issuer specific event risks caused by sustainability issues, which may lead to a better risk/return profile
  • Anticipation of broader sustainability issues that are not yet fully reflected in the market. As such, forecasting changes in credit ratings may be more accurate and effective

Importance for your portfolio

We aim to provide our clients with new tools, as the investment universe develops, to tackle their investment challenges. Integration of ESG in the credit assessment and investment decisions helps build better risk-adjusted investment strategies.

Sustainable fixed income at UBS-AM

ESG integration has become a loose-term that refers merely to the use of sustainability data or ratings in the investment process. We think this is a good starting point but simply not enough! At UBS-AM, our approach goes beyond simple screening and is differentiated through:

  • Integrating material ESG data into our credit research alongside financial data
  • A proprietary UBS ESG score, also providing a forward looking view
  • UBS Fixed Income SI Advisory Board providing oversight
  • Placing credit analysts at the heart of integration
  • Experienced sustainable research team providing macro views and engagement

The investment team follows a disciplined, consistent, fundamental research-driven investment process, in which diversification of return sources as well as active portfolio and risk management are key to generate stable returns for our clients. The UBS ESG research adds an additional dimension for assessing the credit quality of corporate issuers. Each strategy will take into consideration proprietary UBS ESG scores for security selection and apply negative screening on controversial sectors when constructing the portfolio to ensure a better sustainability profile.

We are deeply committed to moving sustainability beyond a niche investing activity. By addressing the challenges of systematically integrating ESG factors across our fixed income platform we are moving a step closer to our ambition of broad SI integration across all our asset classes.


Explore insights and education resources on how sustainable index investing can help you achieve your investment goals

Expand your understanding

Learn more about the options available with sustainable index investing – from ETFs, to index or rules-based funds to customization.

Deepen your knowledge

Deepen your knowledge on how to construct sustainable portfolios with our latest case studies on sustainable index investing.

Explore innovation

Hear from innovators in the sustainable index space on the actions they are taking on their decarbonization journey.