Investors want more ESG options on fixed income

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The eyes of investors, both individual and institutional, are turning more and more towards ESG investments due to various factors which all revolve around climate change. A new report from RBC Global Asset Management has found that the COVID-19 pandemic is prompting investors to engage more in the space and want more investment options.

The survey involved 800 participants worldwide, of which about 45% represented companies with at least $ 1 billion in assets, and 17% of those who responded worked for organizations with 10,000 or more employees. .

The report found that 72% of investors use ESG principles in their approach to investing and 83% of investors believe that portfolios containing ESG investments will perform as well, if not better, than non-ESG portfolios. In the United States, which currently has no federal or regulatory standards for ESG measurements and reporting, 77% of investors said they believe portfolios exposed to ESGs perform as well as or better than their peers. not ESG.

Equities continued to lead the charge for the most heavily invested asset class using ESG factors; Globally, 82% of investors use an ESG approach in equities. In the United States, that number was 79%. Fixed income products were next 60% as demand increased for more products.

Image Source: RBC’s ESG in a Pandemic World

Of all investors surveyed, 41% thought more fixed income options that included ESG criteria were needed. This is a significant number that reflects the increased interest of investors of all types in ESG investing.

“In a year where ESG risks such as COVID-19, high-profile cyber breaches and climate-related weather events have made headlines, it will be interesting to see how perceptions towards ESG continue to evolve. Said Melanie Adams, Vice President and Director. Corporate Governance and Responsible Investing at RBC Global Management in a press release.

SPDR offers an ESG bond investment

SSGA currently offers a bond ETF with an ESG perspective, the SPDR Bloomberg SASB Corporate Bond ESG Select ETF (RBND). The fund replicates the Bloomberg SASB US Corporate Ex-Controversies Select index and offers a sampling strategy that generally has the same risk and returns as the index.

The index measures the performance of investment grade corporate bonds issued by companies with certain ESG qualities and also presenting the risk and return qualities of the parent index, the Bloomberg US Corporate Index. The parent index includes fixed rate corporate bonds, taxable and denominated in US dollars. These bonds are issued by US and non-US industrial, utility and financial institutions with a maturity of one year or more and with a face amount of $ 300 million or more outstanding.

The index uses an R-Factor developed by SSGA to rate parent index companies based on ESG criteria. The R-Factor takes ESG and corporate governance factors into account when rating companies. It excludes companies that derive significant income from any of the following: extreme event controversies, controversial weapons, violations of the United Nations Global Compact, civilian firearms, thermal coal mining and the tobacco. Companies that do not have an R-Factor in the parent index are also deleted.

The securities in the index are weighted to maximize the R factor of the index while minimizing the total risk relative to the parent index.

RBND can be used as a building block for ESG investments and has an expense ratio of 0.12%.

For more news, information and strategy, visit the ESG channel.


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