This article aims to explore the special relevance of environmental, social and governance (ESG) considerations in credit portfolios, particularly within the context of buy and maintain (B&M) credit mandates, where the long-term nature of the investments makes a sustainability perspective explicitly pertinent.1 We provide insights into how leading ESG investment managers incorporate ESG across a range of topics: integration of ESG issues, climate change and stewardship.

We have seen considerable progress over recent years, particularly among our highly-rated managers. However, despite some demonstrating market-leading practices, there is still a long way to go for the fixed income universe as a whole. Therefore, we also draw out how investors can engage with their fixed income managers to help improve their approach in this area.2

Climate change examples feature prominently throughout as we see both investment managers and investors exploring the materiality of this long-term risk. In this article, we do not focus heavily on social aspects or the growing number of green/social bond funds being launched, but recognize the growing momentum in these areas.

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1 Our starting position is that ESG issues impact credit risks, as supported by a growing body of literature. In a 2018 report commissioned by Japanese pension fund GPIF and the World Bank, the authors conducted a survey of studies and found that, on balance, ESG integration in fixed income does not entail a return sacrifice and ESG factors are indeed material to credit risk. See Inderst, G and Stewart, F, Incorporating Environmental, Social and Governance (ESG) Factors Into Fixed Income Investment, World Bank Group publication, April 2018, pp. 17–21.

2 See also our February 2020 paper, Responsible Investment in Fixed Income, available at

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    July 2021