13 February, 2020

Mercer has spent a number of years helping clients invest more responsibly — and nearly a decade providing clients with environmental, social and corporate governance (ESG) ratings1 for investment strategies.

Bond markets were no exception. As asset managers increasingly handle strategies with a focus on sustainable investment (SI), Mercer has seen an upward trend in ESG ratings across the fixed income strategies that it rates, as shown below. 

Fixed income strategies are playing catch-up on ESG integration and we believe the upward trend of fixed income managers incorporating ESG will continue its momentum based on a number of factors, including increased regulatory focus and asset-owner demand.

There are four main ways in which investors might look to incorporate their sustainable investment beliefs in their fixed income portfolios.

  1. The integration of ESG factors into fixed income investment processes
  2. Investment in sustainability themes or impact investments
  3. Stewardship or engagement
  4. Screening2

1 An ESG rating is assigned to each strategy by a researcher and forms part of our standard reports.

2 This framework is consistent with our approach to other asset classes, as outlined in “The ABC of ESG,” available here.

Click here to download
the Sustainable investment in Fixed Income report to find out our thoughts on best practices about the four approaches. In addition, read how Mercer’s ESG ratings allow investors to have a better understanding of how asset managers are taking ESG factors into consideration when making investment decisions. 

Download the Sustainable investment in Fixed Income report.

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