Alcohol producers have to play an important role in reducing the harm of alcohol. Stricter rules and regulations result in investment risks as well as opportunities. In search of the opportunities, NN IP continues to focus on active engagement with alcohol producers.
Why do we believe in the benefits of integrating ESG information into the investment process? To us, it’s clear that environmental, social and governance issues impact share prices, corporate debt yields and spreads, as well as sovereign debt yields. ESG is relevant because it’s about the competitiveness of companies and as such has a long-term impact on the performance of investment portfolios.
Integrating a stronger focus on sustainability is very suitable for fixed income. We prefer inclusion over exclusion and see engagement as an opportunity to initiate change. Sustainability can be incorporated in a bond portfolio without drastically changing characteristics such as duration, credit quality and diversification.
Sanitation is one of the 17 UN Sustainable Development Goals (SDGs). Inadequate sanitation results in serious public health issues and heavy economic losses. Nearly half of global losses were in India, where poor sanitation wiped over 5% off it’s 2015 GDP.
The focus on environmental, social and governance (ESG) aspects of investments by institutional investors has increased significantly in the past decade. Current government and investor agendas tend to be ‘E’ skewed. Infrastructure investments can offer much more than just environmental benefits. Recent rise of UN Sustainable Development Goals (SDGs) have raised greater ‘S’ and ‘G’ awareness.
Investors and asset managers are progressively incorporating the risks of climate change into investment decisions, as it is becoming increasingly clear that those companies that fail to address the issue may be exposed as the world transitions to a low carbon future. As a leading contributor to climate change through its operations, services and use of its products, the oil and gas sector is particularly exposed to the associated risks of climate change. It will require significant changes in the short, medium and long term to mitigate this exposure.
Previously, bond markets in Europe had been divided by international boundaries and the vagaries of national regulations and conventions. But the new market for bonds issued in euros eliminated currency risks and created an integrated market bound by a single set of rules.
With responsible investing and ESG integration now in the mainstream investment arena, the focus is gradually shifting to the actual impact companies are having on society and the environment. A positive impact can lead to more sustainable longer-term business models, supporting valuations and risk–return characteristics of investment portfolios. Measuring this impact remains a challenge for analysts, but improved reporting and transparency, the rise of more data sources and the standardization of measurement methodologies will lead to progress in the next few years. For investors, engagement and execution of our duties as owners of the companies in which we invest can create a win-win for clients’ investment portfolios as well as for broader society.
If we look past negative headlines regarding tariffs and trade wars, the world is currently seeing healthy economic growth and upward pressure on interest rates due to the phasing out of monetary stimulus. Such an environment presents a buying opportunity for Convertible Bonds (CBs). CBs’ equity-like characteristics mean they benefit from economic growth while they are only modestly impacted by rising rates because of their low duration, which averages 1.8 years across the asset class.
Although it was set out that last week would have to be the week in which the EU and the UK would agree on the transitionary deal to leave enough time to arrange a smooth transition, this did not happen. Over the last weeks it had already become clear that a deal to be reached in October had become quite unlikely. There is significant pressure for a deal to be reached and to be approved by UK parliament before the end of the year. One of the key difficulties is the issue of the border with Ireland. The good Friday agreement rules out a hard border between Ireland and Northern Ireland. As Northern Ireland is part of the UK, the Irish-North Irish border would be an external border between the UK and the EU.