Sustainable Investing | Wellington Management’s Post

Columbia Threadneedle Investments, US recently published a position paper on how they employ the Paris Aligned Asset Owners’ Net Zero Investment Framework (NZIF) to their corporate bond portfolios. The report, authored by Simon Bentley, highlights Columbia Threadneedle’s reliance on engaging with investee companies, noting that they are “seeking to use [their] influence as providers of capital to these companies to drive positive change”. The full report can be accessed here: https://lnkd.in/eg2VcWxe #NetZero #Corporatebonds #NZIF #ColumbiaThreadneedle #InvestmentStewardship #ShareholderEngagement #AQTION

🌟 Exciting news! Barclays recently unveiled its new energy transition-focused investment banking team, a significant move in driving sustainable finance and supporting global efforts toward net-zero goals. The team's focus on green finance aligns with the growing importance of sustainable investing in today's market. #ESG #SustainableFinance #EnergyTransition #NetZero #Barclays #InvestmentBanking 🌍💼

Access to #sustainablefinance and #portfoliodiversification —in addition to enhanced yields, have been identified as drivers that lead #institutionalinvestors to invest in #alternativeinvestments.

Alternative fixed income provides opportunities to increase the portfolio yield and decrease the risk – through more diversification. It is also well-suited for responsible investing, a major trend for investors who aim to finance a more sustainable world whilst protecting their portfolio against ESG risks. Read more > https://lnkd.in/eTp-G5CX #alternativefixedincome #privatedebt #investments #activemanagement #insurance

With the rise of mandatory #ESG reporting, it's crucial for Private Equity fund managers to update their ESG reporting. Check out Cherry Bekaert's 2023 Private Equity report for insights on how new ESG rules could impact your portfolio: https://okt.to/pHsjmq #ESGInvesting #SustainableInvesting #PrivateEquity #PEIndustryReport

What can SLB bond investors learn from equity investors? Establishing KPIs to incentivise and align management behaviour might be new for the growing Sustainability Linked Bond (SLB) market, but it has long been part of the equity governance tool-kit in setting KPIs for executive long-term incentive plan (LTIPs) bonuses.   In my view, credit analysts under-research LTIPs, especially in investment-grade markets (less relevant in high yield). The KPIs in management LTIPs influence various behaviours like seeking a company sale, acquisitions, disposals, and strategic shifts, influenced by shareholders who tolerate risk variability in exchange for higher returns, unlike bond investors.   This is where SLBs come in. ESG criteria increasingly feature in LTIPs. The pros and cons of this are contestable; however, SLB bond investors should take note. Governance around remuneration structures is stronger than SLB KPI setting. There is an opportunity for a multi-stakeholder approach, whereby bond investors advocate for aligning KPIs with management LTIP plans.   Enel, among few, has generally linked its SLB KPIs with its LTIP. This makes the potential breach of Enel’s SLB KPI even more noteworthy, as both have a hurdle at 148gCO2/kwh carbon intensity. This underscores a critical issue for the SLB market: What truly motivates management?   The charts below illustrate cash outflows to the firm at various carbon intensity levels, with bond holders receiving just under €30m (stick) for a breach, while management receive nearly 30x less (carrot) for achieving 148g or better. They also depict cash inflows for management on the same basis. Though simplistic and omitting significant non-cash flow benefits, the point is clear: Bond holder SLB payments are not trivial and dwarf CO2 related LTIPs, however they are not big enough to move the dial on earnings related LTIP payments (ie. small in context of €100 billion invested capital) and are therefore likely relegated to a secondary role vs LTIP incentives. Investors would be well placed to take a multi-stakeholder approach and seek alignment between SLBs and LTIPs.   Furthermore, SLBs can play a supportive role for LTIP governance processes. Last year, Enel's management missed earnings and return-related LTIP payouts but benefited from the remuneration committee adjusting CO2 intensity down to meet the LTIP hurdle precisely. However, last year's CO2 related LTIP wasn't aligned with SLB KPIs. This year, with multiple stakeholder scrutiny and bond covenant support (albeit not the tightest), the situation differs. For more info on Enel SLBs, Anthropocene Fixed Income Institute have a report with a neat table showing all the Enel SLBs with hurdle levels. #SLB #esginvesting

As mandatory Carbon reporting disclosures become more common, Private Equity fund managers will likewise have to evolve their ESG reporting framework. Read Cherry Bekaert's 2023 Private Equity report to learn how the latest ESG regulations may affect your portfolio: https://okt.to/5F8aHw #SustainableInvesting #PrivateEquity #PEIndustryReport #growthstrategy #YourGuideForward

Interesting 🗣 BlackRock is launching a new private debt fund focused on #ClimateTransition, one of the fastest growing ESG investment strategies in the US. The fund will be managed by a team of private debt investors and sustainability specialists. The move comes as BlackRock CEO Larry Fink has long warned of the need to drag private markets into the climate debate, amid concerns that high-emitting assets being divested by public firms were merely being transferred to the less transparent private market. There are clear signs of a shift, with private debt investors increasingly looking to ESG as a new growth opportunity. Fund managers have been quick to embrace private credit strategies and profit from a continued reticence from banks to commit capital to risky borrowers. #JustTransition #ESG #SDG #ChooseBetter #US #UAE #Growth #ClimateFinance Details : https://lnkd.in/dphYyCGW

As mandatory #ESG reporting disclosures become more common, Private Equity fund managers will likewise have to evolve their ESG reporting framework. Read Cherry Bekaert's 2023 Private Equity report to learn how the latest ESG regulations may affect your portfolio: https://okt.to/3BRqMw #ESGInvesting #SustainableInvesting #PrivateEquity #PEIndustryReport

As mandatory #ESG reporting disclosures become more common, Private Equity fund managers will likewise have to evolve their ESG reporting framework. Read Cherry Bekaert's 2023 Private Equity report to learn how the latest ESG regulations may affect your portfolio: https://okt.to/f7w1Dr #ESGInvesting #SustainableInvesting #PrivateEquity #PEIndustryReport