Sustainable investing in fixed income

Interest in incorporating ESG considerations into investment decisions has increased substantially over recent years.

20 May 2019

In this Insights article, UBS Asset Management examines the drivers behind the recent trend of incorporating Environmental, Social, and Governance (ESG) criteria into investment decisions. As investors have shifted from traditional investments in equity markets toward toward fixed income investments, ESG criteria has become critical for many asset managers in APAC and beyond.

Growing regulatory and fiduciary pressures have led to the application of ESG principles to fixed income investments. This has been a key driver for investors' demands for increased integration of ESG criteria into investment decisions. Additionally, we explore the impact on fixed income investments in light of the increasing levels of corporate disclosure and the growth of coverage by ESG data providers.

UBS Asset Management examines in detail what is driving the growth of ESG considerations, and the impact this trend the world of asset management. We also delve into how the ESG corporate universe compares to the traditional world of investment, notably the complex nature of investing in green bonds.

Major topics for discussion within this article include:

  • An analysis of the inherent challenges faced in addressing ESG issues in fixed income - starting with the major differences between equity asset classes and fixed income.
  • The importance of index analysis to examine the differences between indices to drive more effective management of green bond portfolios.
  • Perspectives on where to start and develop the integration of ESG considerations into fixed income investments, particularly in the context of regulatory changes, evolving corporate governance best practices and socio-political pressure for responsible investing.
  • Establishing a foundation for sustainable themed investing through greater ESG integration into the investment approach.