A second wave of performance for BBB bonds?
Forget A, B or C… BBBs are all the rage at the moment in the alphabet soup of fixed income....
This week is Good Money Week. Now in its 15th year, it was started to raise awareness of sustainable, responsible and ethical finance to help people make good money choices.
This year, the theme is how our money can support a green and fair recovery after the pandemic, ensuring we build back better and in a way that works for people, the planet, our health and our wealth.
So, in the same way we make a choice about where we buy our coffee, meat or clothes, Good Money Week encourages us to also ensure our bank, pension, savings and investments are equally ethical and sustainable.
At FundCalibre, we’ve been highlighting responsible investing since the very beginning and we now have 13 Elite Rated and Radar funds specialising in this area.
We asked the managers of some of those funds to share with us the themes in responsible investing that they are most passionate about. From ocean bonds to plant-based protein, the themes are wide-ranging:
Graeme Baker, co-manager, Ninety One Global Environment
“If we fail to limit global warming, the consequences for humankind and the natural world will be disastrous. My passion is investing in businesses that are enabling the transition to a low-carbon economy: from clean-energy utilities; to companies in the electric-vehicle value chain; to a wide range of technology, chemicals and manufacturing businesses that are decarbonising the way the world produces and consumes. I care about this from an environmental perspective because decarbonisation is urgently needed. I’m also passionate about it from an investment-management perspective, because I think decarbonisation offers our investors one of the most exciting growth areas in the economy today.”
Noelle Cazalis, co-manager, Rathbone Ethical Bond
“As a diving enthusiast, I am looking closely at developments in the blue bonds market. Blue bonds finance marine sustainable projects, but they are still very rare. Oceans are vital to our planet. Since 1970 the ocean has absorbed 90% of Earth’s additional heat, but they are under threat – in 2016 alone, almost a quarter of the world’s coral reefs disappeared due to bleaching. I believe sustainable marine projects need to be financed if we want to protect oceans and the economies that rely on their health. The Seychelles is a good example, as previous fishing practices decimated fish stocks. It was therefore natural for them to issue a blue bond. Although they are still nascent, I am excited about the future of blue bonds and believe they can be an interesting funding tool to tackle the immense challenge of ocean protection.”
Gabriel Micheli, co-manager, Pictet Global Environmental Opportunities
“One nascent area we are increasingly following is the alternative or plant-based protein space. Societies tend to increase their average intake of animal protein as income per capita grows. The substantially higher resource consumption required by meat production relative to a vegetarian diet risks placing a considerable strain on natural resources in the coming decades, both in terms of water and energy usage. The IPO of Beyond Meat last year drew considerable attention to this rapidly growing segment, but merely represents the tip of the iceberg. We are seeing considerable investment and innovation from dynamic startups and established food companies alike. We believe there is a considerable opportunity with such business models aimed at reducing dependence on animal protein, while catering to modern urban lifestyles.”
Simon Clements, co-manager, Liontrust Sustainable Future Global Growth
“This is perhaps not a surprise given the current situation, but I would say innovation in healthcare, which clearly has a huge role to play in any move towards a cleaner, healthier and safer world in the future. We continue to see huge advances in technology across areas such as gene editing and DNA sequencing and these are revolutionising how we think about healthcare. The traditional model has a large element of trial and error about it, with people seeking help when they feel ill and hoping whatever drug or treatment prescribed is effective. But we are moving towards a more personalised model where we can understand how someone’s genetic make-up makes them vulnerable to certain diseases. This is also opening up new ways to counter conditions such as cancer, dementia and Parkinson’s.”
Aitken Ross, co-manager, Liontrust Monthly Income Bond
“Having access to shelter is one of the most basic human needs alongside food and clothing, and companies that provide high-quality affordable housing are a vital part of a sustainable society. This covers companies involved in the construction, development, ownership and letting, management and maintenance of housing. We believe social housing provides several key social benefits within the UK and have exposure to this sector across our funds. In the main, social housing providers have operations that fall into two segments: homes available for social letting at sub-market rent and a housing development portfolio, and we view both aspects as positive.”
David Gait, manager, Stewart Investors Asia Pacific Leaders Sustainability
“In the world of sustainable investment very little which counts can be counted or ‘metricated’, let alone standardised. So the obsession with quantifying Environmental, Social & Governance (ESG) is proving particularly challenging. For example, India’s leading tobacco company has an AA ESG ranking and sits near the top of at least two ESG benchmarks, courtesy of its size and its sizeable ESG reports. The Asian group hoping to source coal from a new mine next to the fast-bleaching Great Barrier Reef maps itself to the Education, Health and Sustainable Cities Sustainable Development Goals. So, rather than produce banks of ESG data, the far greater challenge facing Asia Pacific companies and investors is to be authentic, resonant and imaginative when it comes to sustainability.”