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.


SI Foresight

 

Asset Management services and solutions in your location

Please select your region

 

For further information on what we can offer you, please get in touch.

Important legal information

To proceed, please confirm that you are a professional / qualified / institutional client and investor.

Views and opinions expressed are presented for informational purposes only and are a reflection of UBS Asset Management’s best judgment at the time a report or other content was compiled. UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions contained in the content of this webpage have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith but no responsibility is accepted for any errors or omissions. All such information and opinions are subject to change without notice but any obligation to update or alter forward-looking statement as a result of new information, future events, or otherwise is disclaimed. Source for all data/charts, if not stated otherwise: UBS Asset Management.
Any market or investment views expressed are not intended to be investment research. Materials have not been prepared to address requirements designed to promote the independence of investment research and are not subject to any prohibition on dealing ahead of the dissemination of investment research. The information contained in this webpage does not constitute a distribution, nor should it be considered a recommendation to purchase or sell any particular security or fund. The materials and content provided will not constitute investment advice and should not be relied upon as the basis for investment decisions. As individual situations may differ, clients should seek independent professional tax, legal, accounting or other specialist advisors as to the legal and tax implication of investing. Plan fiduciaries should determine whether an investment program is prudent in light of a plan's own circumstances and overall portfolio. A number of the comments in the content of this webpage are considered forward-looking statements. Actual future results, however, may vary materially. Past performance is no guarantee of future results. Potential for profit is accompanied by possibility of loss. 
© UBS 2020 The key symbol and UBS are among the registered and unregistered trademarks of UBS.

Reset